attachment 1 ensham responses to des rfis, dated 14 june ... · the conversion to present terms is...
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Attachment 1 – Ensham responses to DES RFIs, dated 14 June 2019. (DES reference EPML00732813)
Item RFI ref
DES RFI Ensham Response
1. 1a) Further to the information provided in the Stage 4 Economic Impact Assessment Report and the Stage 4 Triple Bottom Line Report, the administering authority requests the provision of the estimated costings of the rehabilitation of both the rehabilitation necessary to re-instate the Nogoa River floodplain and the estimated cost of the option presented in the application. It is requested that both options adequately demonstrate how they satisfy the requirements to be safe, stable, non-polluting and sustain a sustain post mining land use.
As confirmed in our meeting with the Department (dated 4 July 2019), the reference to "re-instate the Nogoa River floodplain" in the Department's RFI is a reference to Option 3 studied in the Residual Void Project. This option comprised backfilling residual mining voids located within the pre-mining floodplain up to the elevation of the original floodplain within the lateral extent of the pre-mining PMF level. Option 1 is as described at section 3.1 of the Stage 3 Environmental Assessment Report. Option 3 is as described in section 3.3 of the Stage 3 Environmental Assessment Report. The Submitted Option is as described at section 5 of the Stage 5 Residual Void Report. The below table taken from the supplementary Economic Impact Assessment Report (refer Table 4.2 on page 30 of the supplementary Economic Impact Assessment Report, October 2019) identifies the Rehabilitation Costs for the three options calculated using Net Present Value terms. The use of Net Present Value terms is consistent with the State Economic Impact Assessment Guideline (2017) which recognises that the value of money changes over time, and as such future costs and benefits should be converted to an equivalent value (the Net Present Value) so that costs and benefits can be compared on equal terms. The conversion to present terms is done by applying a discount rate to future cash flows, a rate which recognises that money in the present is worth more than the same amount in the future due to inflation. An NPV value is not the same as the Estimated Rehabilitation Cost calculator value or the value of rehabilitation previously stated in the current Plan of Operations, both of which represent a cash cost calculation. The above table, completed by Deloitte Access Economics, identifies that the submitted option at -$148.91M is $45.35M less than Option 1 and $184.15M less than Option 3, all expressed in Net Present Value terms. With respect to the request that Ensham adequately demonstrates how the Submitted Option and Option 3 satisfy the requirements to be safe, stable, non-polluting and also a sustainable a post mining land use, Section 6 of the Stage 5 Residual Void Report summarises the impacts on environmental values associated with the submitted option. Ensham’s view, having regard to the outcomes of the independently peer reviewed environmental studies completed in Stage 3, is that the Submitted Option will not cause any serious environmental harm to land, surface waters or any recognised groundwater aquifer and is consistent with condition G15 of the Environmental Authority. The impacts of Option 3 on environmental values are described in Sections 8-11 of the Stage 3 Environmental Assessment Report and at page 19 of this report.
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DES RFI Ensham Response
The approved Terms of Reference for the Residual Void Project require Ensham Mine to use the output of stages 1, 2 and 3 to conduct a detailed Triple Bottom Line assessment (TBLA) to determine the Final Option for submission to the administering authority. On completion, the TBLA must be peer reviewed by an independent suitably qualified third party (i.e. a person whose professional training or experience is relevant to the matters being considered) before submission to the administering authority. The TBLA was conducted pursuant to the Terms of Reference and the independent suitably qualified third party used was the University of Queensland Sustainable Minerals Institute, who commented that the TBLA process was conducted “in accordance with best practice for TBLAs”. Having regard to the output of the TBLA, Option 3 of the Residual Void Project is not the Final Option proposed as a result of the RVP Project studies and is not the submitted option which is to be assessed by DES.
2. 1a) The rehabilitation costings for the option presented in the Economic Assessment and used in the Triple Bottom Line Assessment of $135.9 million is inconsistent and significantly less than the rehabilitation costs presented in the 2017-2019 Plan of Operations which details a costing of $154,092,576 for all overburden and waste dumps rehabilitation outside of the residual voids within the floodplain.
The rehabilitation costing of $154M provided in the previous Plan of Operations (PoOps) is not expressed in Net Present Value Terms, whilst the Economic Impact Assessment (EIA) figures are expressed in Net Present Value terms. Table 4.2 on page 30 of the supplementary Economic Impact Assessment Report (October 2019) compares the rehabilitation costs for the three studied options relative to each other. Comparison of the PoOps rehabilitation ($154M) with the NPV values in the EIA is not a valid comparison as they are not comparable calculations. Refer to item 1a) above for an explanation of why NPV was used in the EIA.
3. 1a) Additionally, the proposed rehabilitation of the proposed self-sustaining vegetation domain details that the inward slopes of spoil will be a maximum of 25% for all spoil with durable rock mulching or other suitable controls. Given that no other suitable erosion controls are available or described, the administering authority requests that the full cost of rock mulch be incorporated into the
Based on discussions with service providers and examples of slope rehabilitation projects of similar materials Ensham believes that there are commercially available financially viable erosion controls, other than rock mulching to a minimum of 1 metre depth, that can be employed for spoils slopes graded between 16% and 25%. Ensham has submitted in the Rehabilitation Management Plan (page 9) that “the inward facing slopes of the low wall spoil at a maximum of 25% would likely include rock mulching or other suitable treatment to further reduce erosion risk potential”. Trials will be conducted to confirm which treatment best suits different slope angles and locations as part of progressive rehabilitation. Ensham confirms that the Estimated Rehabilitation Cost (ERC) that will be lodged with the Administering Authority post decision for the submitted option will include the costs for rock mulching to 1 metre thick for these areas. This is consistent with previous discussions with the Administering Authority and recognises the Administering Authority’s position that rock mulching would be required for these areas if the Administering Authority was
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DES RFI Ensham Response
costing for the option presented in the application. Rock mulch costings should include the placement of at least one metre depth of durable rock material on all areas with slope gradients greater than 15%.
required to undertake the rehabilitation itself. The cost for the addition of 1 metre of rock mulching for the 16 to 25% slopes has been included in the supplementary October 2019 EIA rehabilitation cost.
4. 1a) It is requested that the attached workbook (see attached) is populated both for the costs of rehabilitation to re-instate the Nogoa River floodplain and the presented rehabilitation option. The Department is aware that rehabilitation works at E Pit were completed in 2018-19. The administering authority requests that the actual volumes and costs to Ensham incurred in completing this rehabilitation are provided in the workbook.
The Economic Impact Assessment (March 2019) and the supplementary Economic Impact Assessment of the submitted Option for the Ensham Residual Void Project Report (October 2019), contain sufficient and appropriate detail to enable the Administering Authority to compare the costs (and benefits) associated with the submitted option and the other two options studied under the Residual Void Project. A revised workbook which shows the volumes of material moved by pit for the Submitted Option is provided with this submission, based on the design of the Submitted Option. An equivalent analysis has not been undertaken for Option 3. However, comparable earthworks volumes are set out in section 4.5 of the Landform Design Report. Option 3 earthworks volume totals 241 million cubic metres, whilst the Submitted Option is approximately 103 million cubic metres (as per the Submitted Option workbook provided). The provision of actual costs for the rehabilitation works recently undertaken at E Pit is not within the remit of the Residual Void Project and will not assist the Administering Authority to understand costs for other rehabilitation works as the rehabilitation works required, and, costs incurred for each rehabilitation area differ substantially. Examples of cost differences with E pit include:
• The distance of topsoil from stockpiles to the rehabilitation area • The volume and distance overburden is required to be moved to create the landform • The differences in optimal fleet size and configuration required for handling of both
overburden and topsoil • The final slope angles which inform the volume of overburden to be moved, and • The phasing of works.
In addition to the above, Ensham is unable to provide financial rates incurred for E Pit as these are commercial in confidence.
5. 1b) The administering authority requests the provision of a supplementary economic assessment that incorporates the estimated rehabilitation costings and considers the plausible baseline scenario of the rehabilitation necessary to re-instate the Nogoa River floodplain rather
Ensham advises that the submitted economic Impact Assessment Report (March 2019) and the supplementary Economic Impact Assessment of the Submitted Option for the Ensham Residual Void Project Report (October 2019), both contain the Rehabilitation Costs for all three options studied under the RVP. These costings are represented in Net Present Value (NPV) terms such that the Administering Authority can compare the costs (and benefits) of each option relative to each other. The costs of all three options (Option 1, Option 3 and the Submitted Option), are considered in the Triple Bottom Line assessment, as required by the Terms of Reference for the Residual Void Project. The estimated rehabilitation costings to re-instate the Nogoa River floodplain are not contained in the Stage 5 Submission Report as this Option is not the Final Option submitted to the Administering Authority under the Terms of Reference and the subject of this EA amendment application.
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than the scenario presented in the report.
The Environmental Authority does not specify Option 3 as a relevant Completion Criteria for the residual voids and as such Option 3 is not a baseline scenario for this EA amendment application. Option 3 was studied as required in the Terms of Reference for the Residual Void Project, along with the other options.
6. 1b) The administering authority considers that a baseline scenario that reflects Idemitsu Australia Resource’s commitment to re-instate the floodplain and was the basis of the project’s approval and is therefore the appropriate baseline for this supplementary assessment. This supplementary analysis is requested in order to assist the administering authority to make a decision that takes into account the public benefits or costs of the option proposed.
Ensham does not agree that there is any binding commitment to reinstate the floodplain nor that this was the basis of approval for the 2010 Environment Authority (EA). The Ensham EA does not require reinstatement of the floodplain, rather it requires a study to be undertaken, in accordance with the approved Terms of Reference, to support an application to populate the Completion Criteria for voids. The requirement to undertake this study and finalise the Completion Criteria in the EA is the appropriate mechanism to determine the final rehabilitation design. As such it is not appropriate that reinstating the floodplain is used as a baseline for the submitted application. The approved Terms of Reference for the Residual Void Project require a Triple Bottom Line assessment process for the submitted option, not a comparison of options against a baseline option. The public benefit and costs of the Submitted Option are addressed in the Stage 5 Residual Void Report and the supplementary Economic Impact Assessment (October 2019).
7. 1b) The administering authority requests that this supplementary economic assessment is completed without the assumption of any material uplift in agricultural output but rather considers the actual proposed residual voids in the floodplains containing water that decreases in water quality over time and provides no irrigation benefit.
The economic values provided in Section 6.12 of the Stage 5 Submission Report and Item 9 of this response do not reflect any material uplift in agricultural output associated with a reservoir – the values are based on the post mining land uses submitted. The supplementary Economic Impact Assessment of the Ensham Residual Void Project (October 2019) provided with this submission assesses the Submitted Option and, as requested by the Administering Authority, excludes any material benefits from irrigation.
8. 1c) The administering authority requests the provision of an independent third party analysis of the residual risks and costs of both the rehabilitation activities
The risk assessment submitted in the Stage 3 Risk Assessment Report was informed by the assessment of impacts on environmental values and technical risk analysis conducted by each relevant technical specialist, as summarised in the Stage 3 Environmental Assessment Report. Each of those technical assessments was independently peer reviewed, and corresponding peer review letters included in the submitted documentation provided to the Administering Authority on 27 March 2019. This technical assessment is summarised in section 6 of the Stage 5 Residual Void Report for the Submitted Option.
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required to re-instate the floodplain and the option presented in the application.
The risk assessment methodology used hazard and operability studies (HAZOPs) to identify potential hazards and operational problems that could potentially result from project design. The HAZOPs involved the determination by subject matter experts to identify possible deviations from the expected normal operating conditions inherent in the design that could lead to hazardous situations or future operational difficulties. The preventative control strategies designed to prevent these deviations, together with any recovery or contingency strategies planned to mitigate the consequences of any deviations, were also identified. The risk assessment then involved the systematic scrutiny of the three design options against the three performance criteria of safety, stability and non-polluting. The quality and effectiveness of these strategies was then assessed, resulting in a risk rating. The residual risks were identified using the Risk of Loss Matrix in Appendix 3 of the Risk Assessment Report. This matrix considers the likelihood on the vertical axis and the consequence on the horizontal axis. Definitions for consequences can be found in Appendix 2 of the Risk Assessment Report. Each unwanted event identified in the risk assessment process has a risk ranking – the last column. There were no matters of non-consensus identified in the risk assessment- all participants in the Risk Assessment agreed with the rankings and risk allocations. The risk assessment was conducted in accordance with the Terms of Reference and contemporary risk management standards. The Economic Impact Assessment (March 2019) underwent an independent peer review and the IPR confirmed that all the IPR comments had been satisfactorily addressed. The design of the Submitted Option is consistent with Option 2 except that the post-mine land use is grazing and the water intake infrastructure has been removed. Accordingly, the submitted Option design has been risk assessed and is safe, stable and non-polluting The Submitted Option was presented to the Community Reference Group and considered in the Triple Bottom Line assessment (which was subject to an independent peer review). Ensham is available to explain details presented in the Economic Impact Assessment and/or the Risk Assessment should this be of assistance in assessing this application.
9. It is requested that this independent analysis of the residual risk is considered in the supplementary economic assessment, and provides a quantification of risks both physically and financially with respect to upstream and downstream users, the integrity of the river system and potential effects to the Great Barrier Reef. It is requested that the residual risk analysis
The risks upstream and downstream, the integrity of the river system, and potential effects to downstream environments were assessed in the Stage 3 technical studies. The information from the Stage 3 technical studies was taken into account in the Stage 3 Risk Assessment, included in the Stage 4 Economic Impact Assessment and considered in the Stage 4 Triple Bottom Line Assessment. This has been detailed in Section 6 of the Stage 5 Application Report. The first table below which is a summary of the cost benefit analysis contained in the Stage 4 economic assessment (March 2019) and the supplementary economic assessment (October 2019), both prepared by Deloitte, considers flooding risk both upstream and downstream. The March 2019 Economic Impact Assessment was peer reviewed by an independent expert . The independent peer review letter was provided as part of the submitted information given to the Administering Authority on 27 March 2019. A supplementary Economic Impact Assessment was prepared in October 2019 to exclude any economic value of the sale of water and any agricultural benefits which arose as a result of the sale of that water, and, to include the cost of the landform levee being included as part of the final landform. A peer review of the October 2019 supplementary Economic Impact Assessment was not considered necessary because the methodology remained unchanged, and the subsequent conclusions of this report have not significantly changed against the March 2019 report.
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DES RFI Ensham Response
identify each stakeholder group that is proposed to be responsible for managing the identified risk and which stakeholder groups are exposed to the same risk over time.
As requested by DES the CGE modelling in the October 2019 supplementary Economic Impact Assessment excluded any economic value of the sale of water. In respect of the risk assessment, see above in row 8. As previously noted, the risk assessment presented in the Stage 3 Risk Report was based on the technical assessment of the Options and the technical risk analysis against environmental values, each of which was independently peer reviewed by a third party expert – The peer review reports were provided as part of the submitted information package provided to the Administering Authority on 27 March 2019. Additional technical risk analysis against environmental values was obtained for the Submitted Option including a confirmation of the suitability of incorporating the Option 1 Landform Levee as a final landform for the Submitted Option, a water quality and water balance study for the final Submitted Option landforms (Appendix 5b – Model Run 8) and additional ecological work (Appendix 5e - Onsite Ecology Field Survey Results Report). The upstream and downstream flood impacts of the Submitted Option are addressed in the above and in section 6.4 of the Stage 5 Final Residual Void Report. The Stage 5 Final Residual Void Report identifies that the Submitted Option uses a flood protection landform design to exclude the rehabilitated areas from the floodplain. This landform design is sustainable and protects the rehabilitated landform from flood events up to a 0.1% AEP (1 in 1000 year) event. The risk assessment associated with this landform levee design was assessed as part of the Option 1 landform design and documented in the Risk Assessment report. The second table below identifies the appropriate costs and benefits for the submitted option. It can be seen that the Submitted Option has a higher level of benefit from the reduction in flooding risk when compared to Option 1 and Option 3. The submitted option also has a low greenhouse gas emission cost compared to Option 1 and Option 3. With respect to the request for the provision of costs for both the rehabilitation activities required to re-instate the floodplain, and the option provided in the submitted application, information is contained in Table 4.2 on page 30 of the supplementary Economic Impact Assessment and the second table below.
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Item RFI ref
DES RFI Ensham Response
These costings are presented in Net Present Value terms so a comparative assessment of the three options can be made. Ensham advises that, until rehabilitation is delivered to the quality that would support relinquishment, Ensham is responsible for managing all risks identified in the risk assessment. An application to surrender any or all of the Mining Lease area would need to be compliant with Chapter 5, Part 10 (Surrender of environmental authorities) of the Environmental Protection Act 1994. The Terms of Reference for the RVP Project did not require assessment against the Great Barrier Reef. The following demonstrates there would be negligible risk to the Great Barrier Reef from the Submitted Option:
a) Water runoff is captured within the final landform (p15 Appendix 5b – Model Run 8); b) As any groundwater daylighting is below the external spill level of the landform, there is no risk to the
downstream environment due release of this water; (p15 Appendix 5b – Model Run 8); c) Flood protection to a 0.1% (1 in 1000 year) flood event would isolate the final landforms from the
floodplain, unless an extreme flood event occurs (e.g. greater than a 0.1% AEP event for this catchment) which is considered low probability based upon historical data;
d) The risk to downstream environment in respect of Option 3 is addressed at p 62 at section 6.3.2.2 of the Stage 5 Residual Void Report.
10. 1c)a. Relevant residual risks include, but are not limited to: a. the likelihood and
consequence of the landform levees and high walls failing
Ensham confirms that the short, medium and long term risks of this hazard have been assessed in the Stage 3 Risk Assessment under each option. The risk was assessed as -3, an unlikely likelihood with a minor consequence. The risk of landform levees failing is the same as for Option 1 (namely flood overtopping, piping failure under the landform, landform erosion) as the landform levee for the Submitted Option is the same design as the Option 1 landform levy. This is addressed on page 49 of the Stage 5 Residual Void Report and page 8 of the Risk Assessment Report which considers that, given the controls identified, the risk of loss is generally low. The risk of the high wall failing is addressed on page 49-50 of the Stage 5 Residual Void Report. The landowner would be responsible for managing the risks to stakeholders.
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DES RFI Ensham Response
11. b. the likelihood and consequences of sinkholes and flood inundation events under the instatement of the Nogoa River floodplain option
These risks were considered in the Stage 3 Risk Assessment. Refer to pages 15 and 16 of the risk assessment report for this information. This risk is also described on p147 of the Stage 3 Environmental Assessment Report.
12. c. the ongoing management, engineering inspection and evaluations required for the landform levees
This was considered in the Stage 3 Risk Assessment. Refer to page 8 of the risk assessment report for this information. For the submitted Option this is the same as described for Option 1 at page 8 because the landform design for Option 1 is the same as the Submitted Option. Maintenance requirements for the landform levees are shown in Table 11-1 on p 55 of the Stage 5 Rehabilitation management Plan.
13. d. predicted climate changes effects over time particularly those of temperature, rainfall and evaporation how they will impact land use, stream flow and equilibrium groundwater levels
There is not expected to be any measurable impact of climate change effects from the submitted option. Climate change impacts on the rehabilitated domains would be the same to that of surrounding land not impacted by mining. The main risk is the failure to establish a self-sustaining vegetated cover. This is considered in the risk assessment with the mechanisms being incorrect vegetation selection, insufficient topsoil, incorrect application and poor land management practices (over grazing). The risk is the same across each option as any climate change impact would act equally on each option. The impact of climate change on water quality and pit water volumes has been assessed in the Stage 3 Water Balance Report. Model Run 2 – Option 1 with Climate Change was undertaken to examine the effect of climate change on water quality and equilibrium water levels in the final landforms. The impacts to streamflow have been separately examined in the Stage 5 report (Appendix 5f – Integrated Quality and Quantity Modelling Report p24).
14. e. the management
of risks related to
potential declines
in water quality
(increases in
salinity and heavy
metal
concentrations) in
residual voids over
time
This was considered in the risk assessment for each option under the Element of Evaporative concentration on salinity within the final landform and leaching potential. Further discussion of the risks for the submitted option has been undertaken in Section 6.3.2.3 Water Quality.
15. f. The extent of backfilling
The submitted option requires 107mbcm of spoil movement to create the landform profile in addition to highwall contouring. Ensham has provided the GIS files showing the complete landform design for the submitted option. The extent of backfilling for the submitted option can be visually interpreted and interrogated using this GIS files. Additional information is available in the Stage 3 Landform Study which was part of the 27 March 2019 submission. The stability of the backfilling associated with this option is as described on page 9 of the Risk Assessment. For Option 3, the risks include piping failure (due to pooling of
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water from rain/flood events ), differential settling in unconsolidated backfill areas leading to erosion and vegetation failure, and loss of fill and vegetation during flood events in areas of unconsolidated backfill.
16. g. Wall treatment type
Ensham advises that the risk assessment has considered the different risks associated with high wall and end wall treatments under each option studied. All highwall and end wall treatments for the submitted option exceed a Factor of Safety of 1.5 as described on page 15 of the Landform Design report and page 57 of the Geotechnical Report. This has been confirmed by the independent expert peer reviewer. The landform stability of the submitted option has been addressed in section 6.2.2.2 in the Stage 5 residual Void Report.
17. h. Annual exceedance
probability for pit
overflow (%)
Ensham advises that the landform in the submitted option is designed to exceed a 0.1% Annual Exceedance Probability (AEP) event. The risks associated with this event are as described at page 8 of the Stage 3 Risk Assessment report and are overtopping of the levee, and levee failure due to piping and erosion. The % AEP for pit overflow is presented on p70 of the Stage 5 Residual Void Report. The flood protection of the final landforms are designed to 0.1% AEP which presents negligible afflux to existing conditions.
18. i. Distance between
nearest
watercourse to toe
of nearest pit wall
Ensham advises that this risk for the submitted option is as described on page 9 of the Stage 3 Risk Assessment.
19. j. Wall and landform levee geochemistry above minimum water level
Ensham advises that this risk is assessed for the submitted option on page 8 of the Stage 3 Risk Assessment report. Geochemistry is discussed on p64 of the Stage 3 Environmental Assessment Report. The Stage 5 Appendix b – Model Run 8 report for the submitted option discusses water quality based on the geochemistry of the material used in the highwall and landform levee and low wall materials.
20. k. Presence of water in voids
The risk of water daylighting in the long term in the final landform has been considered in several ways for the submitted option including assessment of water quality and erosion. Following discussions with the Administering Authority, the Water Body domain will be fenced prior to relinquishment, or once the groundwater daylights (whichever is the sooner) to prevent cattle from accessing groundwater. The submitted Rehabilitation Management Plan identifies that the maintenance of these stock fences will be the responsibility of the land owner, which is currently the applicant. Should title transfer to another land owner, then maintenance of the fencing will become the responsibility of the new land owner. Groundwater is predicted to daylight in the final landform at approximately 50 years post mining. The total area inundated over the 240 years modelled post mining will be 153.9ha or 2.57 % of the total rehabilitated area. This is presented on p83 of the Stage 5 Residual Void Report. As groundwater daylights in this 153.9ha it is anticipated that these areas would be utilised by aquatic bird life, similar to current site dams and pits with water (from groundwater), that support large numbers of aquatic bird life that would not exist on site otherwise. A survey of Ramp 4 Fill Point Dam identified 9 species of water birds. This is presented on p63-64 of the Stage 5 Residual void report.
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21. l. Representative void water quality
Ensham advises that this matter is discussed under the Element of Evaporative concentration, Leaching and Void Water Quality shown on page 10 of the Stage 3 Risk Assessment. The risk ranking for each Element was -1, -5 and -5 respectively using the Risk of Loss Rating Matrix shown in Appendix 3 of the Stage 3 Risk Assessment. Void water quality is presented in section 6.3.2.3 of the Stage 5 Residual Void Report.
22. m. Groundwater levels
This risk was identified and assessed on pages 10 and 11 of the Stage 3 Risk Assessment Report. Groundwater levels in the final landform is presented in section 6.5.4.3 of the Stage 5 Residual Void Report. Groundwater will daylight in approximately 50 years post mining in pits A-E but will not daylight in pits F and Y. The groundwater rest levels are summarised in Table 6.5.4.3 of this report.
23. 1d) Further to the Rehabilitation Management Plan and proposed Rehabilitation Criteria provided in the application, the administering authority requests the following: a. The provision of the
location of gauging station and data used to define the completion criteria for Total suspended solids and sulphate as the proposed criteria are inconsistent with previously provided criteria.
The current water quality completion criteria listed in Ensham’s Environmental Authority (EA) were developed using the accepted methodologies described in the table below.
The revised water quality completion criteria, detailed in the submission and shown in the table below, are based upon available laboratory samples collected from the Duckponds Gauging Station between 1989 and November 2018, and were collected by both the Department of Natural Resources Mines & Energy, and, Ensham Resources. Continuous monitoring and field (hand held) data have been excluded from the data base. The Duckponds Gauging Station is located immediately upstream of Ensham Resource’s mining operations. The revised pH and Sulphate parameters are based on a large dataset as indicated in the table below using the same methodology used to develop the current water quality completion criteria. The Electrical Conductivity (EC) and Total Suspended Solids (TSS) were also reassessed based upon a large dataset. The TSS value has the largest change as the data used also includes both rain and flood events. It should be noted that the current TSS value, as listed in the EA, is an aspirational water quality objective, and is not based on recorded data taken from the Duckponds Gauging Station. It is also of note that only 14 of the 212 samples (6.6%) recorded values of less than 10 mg/L between 1989 and 2018.
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24. 1d) Further to the Rehabilitation Management Plan and proposed Rehabilitation Criteria provided in the application, the administering authority requests the following:
b. justification for the
rehabilitation completion criteria for surface water as the proposed completion criteria for salinity is greater than typical freshwater <1,500µs/cm and stock water guidelines and the completion criteria for metals are greater than the toxicity trigger values, stock water guidelines, human drinking water recreation guidelines and unsupported by the
The HEC (2019b) Void Water Quantity and Quality Balance Modelling Report Run 8 analyses the potential for metals/metalloids to bioaccumulate within the Aquatic Habitat domain. Salinity and trace elements (Arsenic (As), Molybdenum (Mo) and selenium (Se)) were modelled to determine water quality with results confirming that bioaccumulation will occur in the Aquatic Habitat domain, which could form up to 153.9ha (or approximately 2.5% of the total 5,995ha rehabilitated). This bioaccumulation does not represent any serious environmental harm to land, surface water or recognised groundwater aquifer, and meets the obligations contained in the Ensham EA. Specific water aspects are discussed further below. Groundwater: Water in the Water Area domain will not cause any significant environmental harm to any recognised groundwater aquifer. This is due to the design of the rehabilitated landform which does not allow this water to report to the receiving environment - the Water Area domain is a sink for regional groundwater, not a source. Specific results of the modelling can be found in the Void Water Quantity and Quality Balance Modelling Report Run 8 (Appendix 5b of the submitted documents) which supports the Aquatic Habitat PMLU. This report has been Independently Peer Reviewed. Surface water: Water in the Water Area domain will not cause any significant environmental harm to surface water. Downstream river water quality would not be impacted by water in the rehabilitated areas because water in the lowest points of the rehabilitated areas (i.e.: Water Area domain will be at a lower height than river water and as such is unable to flow to surface water courses in the receiving environment). In addition, this water is isolated from the floodplain by the landforms which provide flood immunity exceeding the 0.1% (1 in 1000) AEP flood event. The Geomorphology Report (Page 6) identifies that, for flood water to overtop these landforms, there would need to be a very rare and extreme rain event. Should such a rain event occur, the mixing of the relatively small volume of water in the Water Area domain with the extreme volume of flood water involved would be inconsequential. Water remaining in the rehabilitated areas once the flood has resided would be of the same quality as that in the flood. Water quality: In regards to human consumption and or stock water management, Page 9 of the Rehabilitation Management Plan identifies that the Water Area domain will be fenced off to prevent stock accessing the area. The maintenance of the fences will be included into the residual risk payment for relinquishment. The
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administering authority.
Water Area will not be used for human drinking water and will not report to the environment so that it would impact any drinking water. Signage could be added to the fencing requirement to advise that the water is not fit for human consumption. The Water Area is also not to be used for active recreation.
25. 1d) Further to the Rehabilitation Management Plan and proposed Rehabilitation Criteria provided in the application, the administering authority requests the following: c. Justification for the
design criteria for endwalls and ramps to be any different to those proposed for outward slopes; that is 10% for tertiary and 15% for Permian given these structures are inherently subject to the same dispersion and erosion susceptibility.
Geotechnical analysis (WSP, 2018) conducted as part of the RVP supports that slope angles of up to 25% would be considered geotechnically stable in the long-term. This has been supported by the Independent Peer Reviewer (Douglas Partners). As such, inward facing slopes within the remit of the RVP have been designed with grades up to 25%. It is important to note that this is a maximum slope angle and that there are significant areas that are below this slope angle. Figures 2.6 and 2.7 of the Stage 5 Rehabilitation Management Plan confirm the areas involved in the 16% to 25% slope angles which are the dark green inward facing slopes on the low wall side. With regards to end walls, the materials discussed on page 33 of the submitted Rehabilitation Management Plan are the same materials as the high walls. This material is more competent than low wall material, and as such, would be stable at the completion criteria proposed.
26. 1d) Further to the Rehabilitation Management Plan and proposed Rehabilitation Criteria provided in the application, the administering authority requests the following: d. As Pits A and B
contain a large volume of quaternary-age material, provision of design criteria, rehabilitation treatment and rehabilitation completion criteria
Studies conducted in the RVP, and confirmed by current site experience, support that Quaternary materials can be used in slope rehabilitation up to 10% when blended with Tertiary materials. When covered with topsoil (or other binding medium), this material is suitable for rehabilitating slopes of less than 10%. These areas have been shown to meet land suitability 4 criteria and effectively used for grazing. Areas where this has been done includes the rehabilitated area from A pit south to A pit north. This material (quaternary/tertiary mixture) was topsoiled prior to seeding. Figures 1 and 2 show the rehabilitation in these areas. Figure 1 Two year old rehabilitation on a bench of Quaternary spoil with no topsoil
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for residual voids is requested. Quaternary-age material is highly dispersive and prone to excessive erosion when exposed to rainfall.
Figure 2 Two year old rehabilitation of predominately Quaternary spoil
27. 2 Further to the Stage 3 Hydrology Report and Stage 5 Model Run 8 report, the administering authority requests the provision of a full description and assessment of the impacts on groundwater quality from the rehabilitation necessary to re-instate the Nogoa River floodplain and the presented rehabilitation option.
Pages 79-84 of the Stage 5 Final Residual Void Report, submitted to DES on 27 March 2019, detail groundwater impacts for the assessment. Additional information is available in Section 2.2 and Section 6 of the Groundwater Report prepared by HydroSimulations (Dr Noel Merrick) and Independently Peer Reviewed by DHI Water & Environment (Dr Jason Antenucci). These reports support that there will be no direct or indirect release of contaminants to groundwater aquifers and there will be no actual or potential adverse effect on groundwater aquifers from the submitted option. Based on this, it is reasonable to state that the Submitted Option will not impact the environmental values of groundwater. Groundwater impacts for Option 3, studied as part of the RVP, are detailed in the Stage 3 Groundwater Report. Specifically, Section 2.3 contains the Option 3 description and Section 7 contains Option 3 Assessment.
28. 2a) It is requested that this assessment include: a. appropriate monitoring, management and mitigation measures to ensure that no adverse effects on groundwater occur.
Page 84 of the Stage 5 Final Residual Void Report identifies that "the existing monitoring conditions contained in the Ensham EA will be used to monitor the groundwater impacts (drawdown and quality) up to relinquishment. Consistent with Condition G27 and G28 of the EA, a Post Closure Management Plan (PCMP) will be prepared at least 18 months prior to final coal processing on site and will detail the monitoring requirements for groundwater post relinquishment." Progressive rehabilitation of the mine, detailed in the submitted Rehabilitation Management Plan, will allow the groundwater monitoring requirements to confirm groundwater modelling outcomes prior to relinquishment and inform any further monitoring required. Based on the above, it is appropriate to document post relinquishment groundwater monitoring requirements in the Post Closure Management Plan.
29. 2b) It is requested that this assessment include: b. an assessment of the potential inter-action between the alluvium, Nogoa River and surface water collecting in the pits and consideration of
The Stage 3 Groundwater Report identifies that there is some natural leakage from the Nogoa River to the alluvium which has no effect on River Quality (refer Section 3.3 of Stage 3 Groundwater Report). Water collecting in the rehabilitated land (the Water Area domain) will not cause any significant environmental harm to any groundwater aquifer including the alluvium. The design of the rehabilitated landform does not allow this water to report to the receiving environment that is groundwater will flow into the pit only. Specific results of the modelling can be found in the Void Water Quantity and Quality Balance Modelling Report Run 8 (Appendix 5b). The content of these reports has been Independently Peer Reviewed.
14
Item RFI ref
DES RFI Ensham Response
the potential groundwater impacts to the river system.
30. 2b) It is requested that this assessment include: c. an assessment of the groundwater model prediction that there will be a net outflow from the final landform voids for approximately 35 years from Pits B, C and D; that is act as a source to groundwater. During this period the potential for infiltration from the pits to the receiving environment and potentially to Groundwater Dependent Ecosystems.
P34 of the groundwater report identifies that during the 35 years immediately post underground mining, there would be migration of surface water in pits B, C and D to the underground mine. Water moving to the underground during this time will be of very similar quality to groundwater experienced regionally and as such there is no impact on groundwater aquifers during this period. Void Water Quantity and Quality Balance Modelling Report Run 8 (Figures 10, 14 and 17), supports the view that even if there is a net outflow, bioaccumulation would not be an issue during this 35-year period. In particular the RGS Report (Material characterisation and source term development for the Ensham Coal Mine Final Void Plan, p iii Executive Summary) confirms that the Ensham Coal mine will have low potential for acid generation and the risk of Ensham experiencing elevated concentrations of metals/metalloids in surface and groundwater will be low. Bioaccumulation only commences once groundwater presents in the Water Area domain, and evaporation is able to take effect some 50 years post cessation of mining. At this point in time, this domain is a sink and not a source for groundwater i.e. surface water does not flow back into the groundwater system.
Accordingly, water in the Water Area domain will not impact on GDE's.
31. 2b) It is requested that this assessment include: d. assess the surface water quality within the final landform voids as they will be sodic, saline and have high concentrations of heavy metals (in particular arsenic, molybdenum and selenium) which may impact on the groundwater receiving environment.
The Run 8 Water Balance Report (Appendix 5b) contains this information which describes surface water quality for the submission. This report has undergone Independent Peer Review. See also RFI 30 above.
32. 2b) It is requested that this assessment include: e. assess the effects of external inputs such as during high rainfall or flood events that may affect whether the
Page 14 of the Model Run 8 Report (Model Limitations) identifies all model limitations specified in the Stage 3 Void Water Quantity and Quality Balance Modelling report (HEC, 2019) also apply to Model Run 8. Section 4.3 of the Stage 3 Void Water Quantity and Quality Balance Modelling Report identifies that "A record of 129 years of rainfall data (1889-2017 inclusive) was obtained for the site from the SILO Data Drill2 for a location near the Ensham Mine. The data set was repeated to simulate 258 years to provide a climate sequence long enough to reach an equilibrium water level in the pit voids.” As such, rainfall events based upon historical rainfall data have been included in the various water balance simulations.
15
Item RFI ref
DES RFI Ensham Response
landform acts as a source or sink.
33. 3 Further to the Stage 3 Hydrology Report, Stage 3 Water Solute and Balance Report and the Stage 3 Environmental Assessment Report, the administering authority requests the provision of an assessment of surface water environmental values. The water quality in the final landform voids will be greater than human drinking water and recreation guideline values for arsenic, molybdenum and selenium. The pooled water in the residual voids is unlikely to be suitable as drinking water for stock or habitat for native fauna. It is requested that a full description and assessment of the impacts of the predicted surface water quality in the residual voids to humans, stock and native fauna is provided. It is requested that this assessment detail and quantify the impacts to surface water quality if the water is released from the voids with the provision of appropriate monitoring, management and mitigation measures that ensure no adverse effects to surface water quality, humans, stock or native fauna occur.
Please refer to responses for RFI 24 above. Analysis of the HEC (2018c) Void Water Quantity and Quality Balance Modelling report indicates that there is potential for metals/metalloids to bioaccumulate within pit waters. They may therefore exceed aquatic guidelines to various aquatic life forms over time when compared to the trigger values contained in the ANZECC (2000) Water Quality Guidelines. Nevertheless, it is anticipated that the water bodies are likely to provide some wading resources for transitory bird species. The Stage 3 Ecological Report identified the risk that due to the gradually increasing salinity and contaminant levels, the diversity of aquatic species within the resultant water bodies could decline over time. However, the Submitted Option would still result in a waterbody suitable for wading/resting for bird species. This is currently observed for existing onsite mine water dams (see photos p64 Stage 5 Residual Void Report). The sensitive area in this locality is the Nogoa river. The final landforms do not adversely impact the river or groundwater and would not impact on the use of the river by native fauna or impact on GDEs. (refer p74 Stage 3 Ecological Assessment report).
Economic Impact Assessment of the Submitted option for the Ensham Residual Void Project
1
Economic Impact Assessment of
the Submitted option for the
Ensham Residual Void Project
Ensham Resources Pty Ltd October 2019
Commercial-in-confidence
Economic Impact Assessment of the Submitted option for the Ensham Residual Void Project
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a
legally separate and independent entity. Please see www.deloitte.com/au/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited
and its member firms.
The entity named herein is a legally separate and independent entity. In providing this document, the author only acts in the named capacity and does not act in any
other capacity. Nothing in this document, nor any related attachments or communications or services, have any capacity to bind any other entity under the ‘Deloitte’
network of member firms (including those operating in Australia).
Liability limited by a scheme approved under Professional Standards Legislation.
© 2019 Deloitte Access Economics
Contents
Glossary i
Executive summary iii
1 Introduction 16
1.1 Report structure 17
2 Methodology 18
2.1 Conditions under the Environmental Authority
(EPML00732813) 18 2.2 Relevant Guidelines 18 2.3 Implication of these guidelines 19
3 The Submitted option for the RVP 21
3.1 Current status quo 21 3.2 The Submitted option 22 3.3 Other options 25
4 Net benefit to Queensland 26
4.1 Scope of the cost benefit analysis 26 4.2 Identifying costs and benefits 26 4.3 Costs and benefits to Queensland 28
4.3.1 Open cut mine rehabilitation impacts 28 4.3.2 Mining operation impacts 34
4.4 Overall cost benefit analysis results 38 4.5 Sensitivity analysis 42
5 Regional impact analysis 45
5.1 Background on the locality and population 45 5.2 Local employment effects 47 5.3 Non-labour expenditure effects 51 5.4 Effects on other local industries 51 5.5 Environmental and social effects 52 5.6 Second round and flow-on effects 53
5.6.1 Analytical methodology and data 53 5.6.2 Economic impacts – GRP 55 5.6.3 Employment impacts 56 5.6.4 Sectoral impacts 57
References 59
Appendix A : Checklist 63
Commercial-in-confidence
Economic Impact Assessment of the Submitted option for the Ensham Residual Void Project
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a
legally separate and independent entity. Please see www.deloitte.com/au/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited
and its member firms.
The entity named herein is a legally separate and independent entity. In providing this document, the author only acts in the named capacity and does not act in any
other capacity. Nothing in this document, nor any related attachments or communications or services, have any capacity to bind any other entity under the ‘Deloitte’
network of member firms (including those operating in Australia).
Liability limited by a scheme approved under Professional Standards Legislation.
© 2019 Deloitte Access Economics
Appendix B : CGE modelling 66
B.1. The representative household 68 B.2. Producers 68 B.3. Investors 69 B.4. International 70
Appendix C : Calculation notes 71
Limitation of our work 72
General use restriction 72
Charts
Chart 4.1 Grassland resulting from the rehabilitation under the
Submitted option ...............................................................................31 Chart 5.1 Impact on gross regional product by the submitted option,
Central Highlands ..............................................................................55 Chart 5.2 Impact on full-time equivalent employment by the
submitted option, Central Highlands .....................................................56 Chart 5.3 NPV of impact on Gross Value Added ($ million) by industry
for the submitted option, Central Highlands ..........................................58
Tables
Table i Summary of findings ................................................................. iv Table ii Overview of the Submitted option and its implications on
existing operations............................................................................. vii Table iii Benefits and costs components for CBA ................................... viii Table iv Overall CBA results ................................................................. x Table v Attribution of CBA results by item .............................................. xi Table vi Net benefit to Queensland community ($ million) ....................... xii
Overview of the submitted RVP option and its implications
on existing operations ........................................................................23 Benefit and cost items considered in this CBA .........................27 Calculation of rehabilitation costs ...........................................30 Calculation of total net producer surplus .................................35 Calculating the share of net producer surplus attributable to
Queensland .......................................................................................35 Overall CBA results ..............................................................39 Attribution of CBA results by item ..........................................40 Net benefit to Queensland community ($ million).....................41 Comparison of central CBA results with alternative discount
rates ................................................................................................42 Sensitivity analysis – comparison of overall CBA result in
absolute terms ..................................................................................43 Sensitivity analysis – comparison of overall CBA result in
percentage deviation terms from central case .......................................43 Sensitivity analysis – comparison of net benefit for
Queensland in absolute terms .............................................................44 Sensitivity analysis – comparison of net benefit for
Queensland in percentage deviation terms from central case...................44 Population characteristics of the Central Highlands SA3 ............46 Estimated rehabilitation local employment effects relative to
mining industry employment in the locality ...........................................49 Estimated mining operation local employment effects
relative to mining industry employment in the locality ............................49 Estimated rehabilitation option local employment effects
relative to average employment in the locality.......................................50
Estimated mining operation local employment effects
relative to average employment in the locality.......................................50 Estimated rehabilitation and mining operation local
operating expenditure effects ..............................................................51 CGE Inputs for the Submitted option ......................................54 Impact on Gross Regional Product by the submitted option
across regions ...................................................................................56 Impact on full-time equivalent employment by the
submitted option across regions ..........................................................57 Table A.1 Key issues mentioned in the DSDMIP Guideline .......................63 Table A.2 Key issues mentioned in Queensland Treasury Guideline
(2015) .............................................................................................65 Table C.1 Amended flooding risk figures ...............................................71
Figures
Figure 3.1 Location mapping of open cut pits in Ensham Mine .................24 Figure 5.1 Central Highlands SA3 average weekly personal income by
industry – 2016 ($2016) .....................................................................46 Figure 5.2 Unemployment (%) by SA2 in the Central Highlands
Statistical Area ..................................................................................47 Figure B.1 Key components of DAE-RGEM .............................................66
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Economic Impact Assessment of the Submitted option for the Ensham Residual Void Project
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Glossary
ABS Australian Bureau of Statistics
AUD Australian dollar
CHPP Coal Handling and Preparation Plant
CBA Cost benefit analysis
CGE Computable general equilibrium
CO2-e Carbon dioxide equivalent
CPI Consumer Price Index
DA Development Application
DES Department of Environment and Science
DNRME Department of Natural Resources, Mines and Energy
DSDMIP Queensland Department of State Development, Manufacturing, Infrastructure and Planning
EA Environmental Authority
EIA Environmental Impact Assessment
EL Exploration Lease
EPA Environment Protection Authority
ETL Electricity Transmission Line
FOB Free On Board
FTE Full Time Equivalent
GDP Gross Domestic Product
GRP Gross Regional Product
GSP Gross State Product
ha hectares
km kilometres
kV kilovolt
LEA Local Effects Analysis
LGA Local Government Area
ML Mining Lease
Mtpa million tonnes per annum
NPV Net Present Value
NSW New South Wales
PM Particulate Matter
RFI Request for Information
ROM Run-of-Mine
RVP Residual Void Project
SA3 Statistical Area 3
SEARs Secretary’s Environmental Assessment Requirements
SEE Statement of Environmental Effects
Commercial-in-confidence
Economic Impact Assessment of the Submitted option for the Ensham Residual Void Project
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SUA Significant Urban Area
TSP Total Suspended Particulates
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Economic Impact Assessment of the Submitted option for the Ensham Residual Void Project
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Executive summary
Context to the report and summary of results
Ensham Resources Pty Ltd (Ensham) submitted the Residual Void Project
(RVP), required under the approved Project’s Terms of Reference, to the
Department of Environment and Science (DES) on 27 March 2019. The RVP
considered how to best manage the residual voids after the conclusion of
open-cut mining operations at the Ensham Mine. The submission included
an Economic Impact Assessment (EIA) report undertaken in compliance
with the Queensland State Government Economic Impact Assessment
Guideline (2017).
The EIA report addressed the economics of three options as required under
the Project’s Terms of Reference. In particular, the Option 2 EIA information
was prepared on the basis of a water reservoir as the post mining land use
for a number of the rehabilitated mining areas. Water drawn under licence
in large flood events (>17,000ML flow in the river per day) would be stored
in this reservoir and then be available to generate regional agricultural
benefits.
Following receipt of correspondence from the DES and the Department of
Natural Resources, Mines and Energy (DNRME), dated 10 January 2019, the
post mining land use for these rehabilitated mining areas was changed to
primarily grazing. The EIA figures for the revised post mining land use were
recalculated by Deloitte Access Economics and included in the submission
(the Stage 5 Residual Void Report) of 27 March 2019.
On 14 June 2019, Ensham received a Request for Information (RFI) from
DES, which included a request for the preparation of a supplementary EIA
to better document the costs and benefits of the Submitted option, being
the revised version of Option 2. Specifically, DES requested that the
supplementary EIA exclude any irrigation benefits from the reservoir
option. Accordingly, this report has been prepared to address the
requirement for a supplementary EIA as listed in Item (1b) of the
Information Request.
The summary of EIA results on the Submitted option are as follows. All
dollar figures are presented in present value terms using a discount rate of
7%, whereby present value terms are in 2018 dollars.1
The net benefits from the Submitted option presented in this report
remain higher than the other options analysed in the March 2019
report.
The net benefit to Queensland from the operation of the Ensham mine is
around $285 million.
The net benefit to Queensland from the rehabilitation of the open-cut
residual voids to mitigate floods is estimated to be $2.5 million.
The rehabilitation of the open-cut residual voids to mitigate floods also
generates economy-wide impacts as the activity on the Residual Void
Project (RVP) flows through to the economy more broadly. It is
1 This ensures that the figures are in the same year and are comparable to the figures in the previous submission: “Economic Assessment of the Ensham Residual Void Project”.
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Economic Impact Assessment of the Submitted option for the Ensham Residual Void Project
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estimated that Queensland’s Gross State Product (including the Central
Highlands region) increases by $18 million.
The economic impact analysis also projects the state-wide employment
impact in relation to the rehabilitation of the residual voids. This
employment impact includes a combination of direct employment to
rehabilitate the residual voids, as well as any employment from
suppliers and crowding out of any economic activity. It is estimated that
under the Submitted option, there will be an additional 40 FTE
employed annually on average over its life, with about 25 FTE to be
employed in the Central Highlands region.
Table i Summary of findings
Submitted option ($m, NPV)
Monetised benefits ($m NPV2)
Direct benefits of project to Qld
RVP 2.49
Mining Operation 284.94
Total direct benefits 287.44
Economy wide benefits of RVP to Qld GRP
Central Highlands 13.82
Rest of Queensland 3.89
Queensland 17.71
Employment (Annual Average FTE)
Direct benefits of project to Qld
RVP 30
Mining Operation 474
Total direct employment 504
Economy wide benefits of RVP to Qld employment
Central Highlands 25
Rest of Queensland 15
Queensland 40
Source: Deloitte Access Economics.
Note: Queensland is the sum of Central Highlands and rest of Queensland. Figures may not sum
due to rounding and some figures are rounded to assist interpretation.
2 NPV calculated using a 7% real discount rate
Commercial-in-confidence
Economic Impact Assessment of the Submitted option for the Ensham Residual Void Project
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Introduction
Deloitte Access Economics was commissioned by Ensham Resources Pty Ltd
(Ensham) to undertake an Economic Impact Assessment (EIA) of the
Ensham Residual Void Project (‘the RVP’). The RVP considered how to best
manage the residual voids after the conclusion of open-cut mining
operations at the Ensham Mine. The RVP submission, required under the
approved Terms of Reference, was submitted to the Department of
Environment and Science (DES, formerly the Department of Environment
and Heritage Protection) on 27 March 2019.
In this EIA, three options were identified for assessment in the RVP. The
EIA determined regional and state impacts of each residual void option. The
EIA included a Cost Benefit Analysis (CBA) and a Regional Impact Analysis
(RIA) and satisfied all Queensland Government guidelines and assessment
standards, including the “Economic Impact Assessment Guideline” issued by
the Queensland Department of State Development, Manufacturing,
Infrastructure and Planning (DSDMIP).
This report is prepared as a supplementary EIA and it outlines the
Submitted option for the RVP to the DES. The Submitted option is titled as
Option 2 in the 27 March 2019 submission, but in this report it excludes any
irrigation benefits from the reservoir option. This report has been prepared
for the purpose of assisting Ensham to report on findings from the RVP to
the DES. This report is required under the Environmental Authority
EPML00732813 (EA) issued by the DES as part of Ensham mine operations’
reporting requirements.
In undertaking this analysis, Deloitte Access Economics has used data on
the scope, scale, timing, and technical assessment of environmental
impacts provided by Ensham. Deloitte Access Economics has not reviewed
or assessed the validity of these inputs.
This report is prepared solely for the use of Ensham.
About the RVP
The Ensham Mine, an open cut and underground bord and pillar coal mine
located approximately 35km east of Emerald (in Central Queensland), is
operated by Ensham, a wholly owned subsidiary of Idemitsu Australia
Resources Pty Ltd (Idemitsu), on behalf of the Ensham Mine joint venture
(JV) partners. The JV partners, and holders of the Environmental Authority,
are Bligh Coal Limited3, Idemitsu and Bowen Investment (Australia) Pty Ltd.
Together, Idemitsu has 85% equity in the Ensham Mine partly through its
subsidiary company, Bligh Coal Limited. Idemitsu is wholly owned by
Idemitsu Kosan Global, a Japanese listed company. Bowen Investment is
wholly owned by LG International, a Korean listed company.
EA EPML00732813 (the EA), dated 9 August 2018, is the relevant
environmental authority under which Ensham operates the mine, which
covers the following mining leases.
Open-cut operation: Mining Lease (ML) 7459, ML 7460, ML 70326, ML
70049
Underground operation: ML 70365, ML 70366, ML 70367
3 Idemitsu has 85% equity in Ensham partly through its subsidiary company, Bligh Coal Limited
Commercial-in-confidence
Economic Impact Assessment of the Submitted option for the Ensham Residual Void Project
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The EA was amended in March 2017 to include conditions requiring a
scientific and environmental assessment of the options to rehabilitate
residual voids in the flood plain of the Nogoa River and other voids at the
Ensham Mine.
Conditions G16 of the EA states that a RVP must be completed and
submitted to the administering authority, being the Queensland Department
of Environment and Science (DES, formerly the Department of Environment
and Heritage Protection) by 31 March 2019. The terms of the RVP requires
that the residual void following cessation of open-cut mining operations
does not cause any serious environmental harm to land, surface water or
any recognised groundwater aquifer, other than the environmental harm
constituted by the existence of the residual void itself.
The content requirements of the RVP are contained within Condition G20 of
the EA. Note that this condition has been satisfied: the analysis of options is
available in the report: “Economic Assessment of the Ensham Residual Void
Project”.
In accordance with the terms set out in the EA, the RVP has been divided
into five stages. This economic assessment forms part of the technical
assessments that will inform Stage 4. The five stages are:
Stage 1 – Project definition and options identification
Stage 2 – Preferred options technical studies
Stage 3 – Preferred options detail design
Stage 4 – Most preferred option identification
Stage 5 – Regulatory documentation.
Under the terms of existing MLs, Ensham is permitted to mine coal in the
open-cut mine to 2022 and mine coal in the underground mine to 2028.
Ensham is currently seeking an extension of the underground mining lease
beyond 2028 to 2031. Deloitte Access Economics has been advised by
Ensham to assume an extension of the underground mining lease, and that
mining operations will continue until 2031 as the current status quo.
Commercial-in-confidence
Economic Impact Assessment of the Submitted option for the Ensham Residual Void Project
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The Submitted option
A summary of the scope of works and associated timing of the Submitted
option is outlined below in Table ii.
Table ii Overview of the Submitted option and its implications on existing
operations
Submitted option (Cattle Grazing)
Open mine rehabilitation (RVP)
Summary of work To utilise landform levees with a final land use outcome of grazing. The redesigned landform will deliver better
post-mining land suitability for cattle grazing than the land pre-mining for the area.
Duration of RVP work 2020 – 2034 (15 years)
Relevant pits ML 7459 (pits A, B, C, D, and potentially E)
Detailed scope of work Bulk of rehabilitation earthwork activity is from
2020 to 2034 Labour is required from 2020 to 2034 to
rehabilitate the residual voids Overburden emplacement areas behind the
existing levee are reshaped in a manner that achieves the minimum stable landform slope requirements
Mine infrastructure is removed in 2034
Pits E, Y and F, which lie outside of PMF, would be
subject to rehabilitation in accordance with the
existing Rehabilitation Management Plan
A biodiversity corridor will be developed adjacent to
the highwall between Corkscrew Creek and the
Nogoa River, which would reduce any visual impacts
that may be associated with the rehabilitated
landforms.
Mining operations
Life of mine Open cut mining operation to 2022 (as with current
ML conditions).
Underground mining operation to 2031 (extension
of existing ML beyond 2028 to 2031).
Extraction of around 64.3 Mt of saleable thermal
coal.
Assessment approach
The CBA estimates the direct and indirect impacts of the Submitted option
on the Queensland community. A range of impacts are considered, including
the financial, social and environmental impacts. Outcomes from this CBA
will be used by Ensham to inform a Triple Bottom Line (TBL) assessment of
the preferred option, as required under Condition G11 of the EA.
Ensham has a statutory obligation under the EA to rehabilitate the open-cut
mine following cessation of mining operations in 2022. As such,
continuation of the current status quo is not a viable option. On this basis,
this CBA does not present a Base Case for determining what would
happen without the RVP.
Commercial-in-confidence
Economic Impact Assessment of the Submitted option for the Ensham Residual Void Project
viii
This CBA includes the benefits and costs associated with operating the
Ensham mine, in particular the underground mine, under the Submitted
option. This is because the Submitted option for the RVP will have a direct
financial impact to Ensham in terms of the option to extend the life of the
underground mine to extract additional coal beyond 2031.
The items considered in this CBA are listed in Table iii. Items are separated
into two broad categories: those benefits and costs that arise directly as a
result of the rehabilitation program; and, those benefits and costs that arise
from operating the Ensham mine to 2031.
These items have been developed in compliance with the Queensland
DSDMIP (2017) Economic Impact Assessment Guideline which attributes
costs and benefits of a project to members of a specified (Queensland)
community. From these components, the share of the net benefits that
accrue to the Queensland community are then aggregated.
Table iii Benefits and costs components for CBA
Item Benefit components Cost components
Open mine rehabilitation (RVP)
RVP rehabilitation cost
Bulk earthwork costs Topsoil, amelioration, seeding and ripping costs Infrastructure removal and equipment costs Overhead salaries and site on-costs Other rehabilitation costs
Residual value of land
Value of mine disturbance area rehabilitated into additional grazing land and other land types with biodiversity values
Flooding risks Benefits from decreased upstream and downstream flooding risk
Externalities Greenhouse carbon emissions from
rehabilitation works
Mining operation impacts
Net producer surplus Gross mining revenue
Operating costs Capital costs
Taxes (Australian, state and local) Royalties
Local Government rates
Rates payable to Central Highlands Regional Council
Royalties Royalties payable to Queensland Government
Company income tax Company income tax payable to the Australian Government
CBAs use market prices where available to estimate the costs and benefits
of a proposal. Where markets are imperfect or non-existent, a range of
techniques are employed to infer the costs and benefits of a proposal. This
includes using industry standard values and findings from a literature
review or surveys as proxy values for the costs and benefits we want to
Commercial-in-confidence
Economic Impact Assessment of the Submitted option for the Ensham Residual Void Project
ix
measure. Where appropriate proxy values are difficult to identify or
unavailable, and hence quantification is not possible, these costs and
benefits are described qualitatively to address the potential impacts of a
proposal.
For those impacts that are difficult or non-effective to place a value on, a
supplementary quantitative measure and/or qualitative measure is
provided, as per that recommended by the Queensland Treasury (2015)
Project Assessment Framework Guideline for Cost Benefit Analysis.
Costs and benefits for the Submitted option is estimated using information
provided by Ensham and the findings of previous feasibility studies prepared
on the Ensham Mine.
All costs and benefits are presented in 2018 dollars and discounted to the
start of 2018 at a real discount rate of 7%, in accordance with the
Australian Office of Best Practice Regulation (2016) guidance on CBA and
relevant Queensland guidelines. The period of analysis is from 2018 to
2060.
Net benefit to Queensland
Assessment of the costs and benefits presented in Table iii indicates that
the Submitted option is expected to generate a net benefit to the
Queensland community of $288 million in net present value (NPV), based
on a 7% discount rate. These benefits are comprised of:
Residual value of land of $2.7 million
Reduction in flooding risks of $0.5 million
Royalties payable to the Queensland Government of $259 million
Company income tax payable to Queensland of $25 million
Local government rates payable to the Central Highlands Council of $1.5
million.
Table iv presents the overall results of the CBA, while Table v provides a
breakdown of the items by affiliation to stakeholders.
Considering the sources of benefits to Queensland:
Net benefit was greatest for the Submitted option compared to the set
of rehabilitation options in the “Economic Assessment of the Ensham
Residual Void Project”, March 2019. This is largely driven by the
approach taken to achieve the outcomes of the RVP, with minor
differences on the mining operations. These minor differences are
driven by a difference in the workforce required for rehabilitation,
affecting the taxes that Ensham has to pay.
The net benefit to Queensland is somewhat offset by the greenhouse
gas emissions that will be produced as part of the rehabilitation work.
Under the Submitted option, the cost of greenhouse gas emissions
equates to $0.8 million in present value terms. This is less than both
Options 1 and 3 with an estimated cost of $1.7 million and $2.7 million
in present value terms respectively, which is the result of higher levels
of diesel consumption to fuel earthwork activities.
The residual value of land under the Submitted option is valued at $2.7
million in present value terms. This option is also expected to provide a
reduction in flooding risk from up to and including a 0.1% Annual
Exceedance Probability flood event. The benefit from reduction in
flooding risk is $0.5 million in present value terms.
Commercial-in-confidence
Economic Impact Assessment of the Submitted option for the Ensham Residual Void Project
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Table iv Overall CBA results
Submitted option ($m, NPV)
RVP
Benefits
Residual value of land 2.74
Flooding risks 0.54
Costs
Rehabilitation cost -148.91
Cost of GHG emissions -0.78
Net benefit -146.41
Mining operation net benefit
Net producer surplus# 429.62
Royalties 258.61
Local Government rates 1.51
Corporate income tax 124.11
Total 813.85
Total net benefit 667.44
Note: Calculation assumes no net benefit for workers and suppliers. Results are presented based
on benefits and costs to stakeholders, including Idemitsu and its joint venture partners, Queensland community, Queensland Government, and Australia. Figures may not sum due to
rounding and some figures are rounded.
# Net producer surplus excludes royalties, taxes and local government rates.
Source: Deloitte Access Economics calculations.
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Economic Impact Assessment of the Submitted option for the Ensham Residual Void Project
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Table v Attribution of CBA results by item
Idemitsu & JV partners
Queensland Community
Queensland Government
Australian Government
and community
RVP
Benefits
Residual value of land 100%
Flooding risks 100%
Costs
Rehabilitation cost 100%
Cost of GHG emissions
100%
Mining operation
Net producer surplus 100%
Royalties 100%
Local Government
rates
100%
Corporate income tax 20% 80%
Source: Deloitte Access Economics.
Table v is the share of benefits and costs attributable to the Queensland
community based on the ownership structure of the Ensham Mine. Based on
results shown in Table iv and Table v, Table vi presents the overall results
for the Queensland community.
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Economic Impact Assessment of the Submitted option for the Ensham Residual Void Project
xii
Table vi Net benefit to Queensland community ($ million)
Submitted option ($m, NPV)
RVP
Benefits
Residual value of land 2.74
Costs
Rehabilitation cost -
Flooding risks 0.54
Cost of GHG emissions -0.78
Net benefit 2.49
Mining operation net benefit
Net producer surplus# -
Royalties 258.61
Local Government rates 1.51
Corporate income tax 24.82
Total 284.94
Total net benefit 287.44
Note: Calculation assumes no net benefit for workers and suppliers. Results are presented based
on benefits and costs to stakeholders, including Idemitsu and its joint venture partners,
Queensland community, Queensland Government, and Australia. Figures may not sum due to
rounding and some figures are rounded.
# Net producer surplus excludes royalties, taxes and local government rates.
Source: Deloitte Access Economics calculations.
Queensland benefits from being a recipient of royalties and a share of the
company income tax from the proponents. On the basis that Queensland
accounts for 20% of the Australian population, the share of the company
income tax attributable to Queensland is estimated to be around $25 million
in present value terms.
The benefit to Queensland excludes some benefit and cost items that could
not be quantitatively assessed. As recommended under the Queensland
guidelines, qualitative analysis was undertaken for these items, including
impacts on noise, landform stability, and land farming efficiency.
Effects on regional community
The Regional Impact Analysis (RIA) estimates the economic and social
impacts of the Submitted option to the regional communities located near
the Ensham Mine. The regional economy is defined as the Central Highlands
Statistical Area 3 (SA3) and includes the populations of Central Highlands
and Emerald. The Ensham Mine is located within the Emerald Statistical
Area 2 (SA2).
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Economic Impact Assessment of the Submitted option for the Ensham Residual Void Project
xiii
The results of the RIA are complementary to the CBA and translate effects
to Queensland into those relevant to the regional communities located near
the Ensham Mine.
Local employment and income effects
For the rehabilitation of the open cut mine, the Submitted option is
expected to directly employ an average of 175 FTE annually between 2018
and 2031 from the locality to operate the mine. The rehabilitation of the
open cut mine is expected to, on average, directly employ 11 FTE annually
between 2020 and 2034 from the locality.
The net local employment effect is estimated as the employment income
that is in addition to average wages in the locality. This includes the net
employment effect from the rehabilitation works and the mining operations.
An additional $7.4 million in employment income is generated for the
locality each year from operating the mine between 2018 and 2031. For the
undertaking of the rehabilitation, the Submitted option generates an
additional $0.5 million of employment income in the locality per year,
between 2020 and 2034.
Other local industry effects
Beyond employment, the Submitted option will generate additional
expenditure on other non-labour inputs such as fuel, equipment, utilities
and professional services, a share of which will directly contribute to the
local economy.
Of the mine’s non-labour expenditure, 17% is estimated to be spent within
the locality, based on the local expenditure data provided by Ensham
(2019). Specifically, the average annual expenditure on non-labour inputs is
estimated to be $2.4 million for the Submitted option.
Assuming this local supplier share is maintained, it is estimated that
approximately the following will be spent in the locality for rehabilitating the
open-cut mine and maintaining the mine operations:
$55.3 million per year between 2018 and 2019;
$57.7 million per year between 2020 and 2031; and
$2.4 million per year between 2032 and 2034.
The rehabilitation is not likely to materially impact other local industries,
such as agriculture, tourism or business travel, given that the Ensham Mine
is likely to repurpose the existing workforce for the continued operation and
the rehabilitation of the mine.
Considering that the employment effects of the Submitted option are small
relative to the labour force in the locality, there are not anticipated to be
any short run adjustments in the cost of living for local residents.
Environmental and social impacts on the local community
It is assumed all environmental and social impacts evaluated in this CBA
will accrue to the locality. These include impacts on flooding risk, residual
value of land and greenhouse gas emissions.
The residual value of land is the most notable local benefit, amounting to
$2.7 million in present value terms. The other benefit is the reduced
flooding risks, which accrues entirely to the locality. Economic value created
from the reduction in flood impacts are estimated at $0.5 million in present
value terms.
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Economic Impact Assessment of the Submitted option for the Ensham Residual Void Project
xiv
Greenhouse gas emission costs are also assumed to accrue entirely to the
locality.4 The total cost of the greenhouse gas emission to the locality is
estimated to be $0.8 million for the Submitted option in present value
terms. This is equivalent to an estimated average annual cost to the locality
of $108,000 over the rehabilitation period.
Second round and flow-on effects
Methodology
We have used a Computable General Equilibrium (CGE) model to estimate
the flow-on effects of the capital investment, operational expenses required
to rehabilitate the residual voids under the Submitted option for Central
Highlands and the broader Queensland economy over time.
The CGE modelling has been undertaken using the same inputs and
assumptions that underpin the CBA analysis. This ensures consistency in
the methodology used to assess the broader economic impact of the
Submitted option. As such, results from the CGE modelling are impacted by
the same data limitations experienced in the CBA analysis.
Economic output impacts
Under the Submitted option, rehabilitation is estimated to lead to an
additional of $12.9 million in present value terms over the period 2018 to
2034, under a 7% discount rate for the Central Highlands economy, at an
average of $1.6 million per year.
More broadly, the modelling indicates that Queensland’s gross state product
(GSP) would increase by $16.6 million, in present value terms, over the
period 2018-2034, under a 7% discount rate, reflecting a small degree of
positive spill over impacts in the rest of Queensland.
Employment impacts
It is estimated that the Submitted option will create an additional 25 FTE
jobs on average per year over the period 2020 to 2034 in the Central
Highlands regional economy. The increased employment impacts are driven
by the amount of expenditure required for construction of the final
landforms over time. Aside from this result, the modelling indicates that
there are some positive impacts to the rest of the Queensland economy
under the Submitted option.
Sectoral impacts
Under the Submitted option, the capital expenditure directly supports
activity in the construction industry, which is reflected in the increased
gross value added (GVA) of $22 million in present value terms.5 This, in
turn, creates additional demand in industries that supply construction with
intermediate inputs, such as heavy manufactures and financial, business
and government services.
Some industries, however, experience crowding out overall. That is, the
capital expenditure leads to reduced activity in some parts of the economy
as it draws productive resources away from them (either directly, or
through increased demand for inputs from other industries). For example,
coal mining industry will experience the highest decrease in economic
4 In other studies, population share is used as a proxy for attributing externality impacts to local communities such as Central Highlands and NSW. 5 Industry gross value added (GVA) measures the value of an industry’s production. It is used to measure the contribution of individual industries to the gross product of a state or territory.
Commercial-in-confidence
Economic Impact Assessment of the Submitted option for the Ensham Residual Void Project
xv
activity by $9 million, in present value terms, over the construction period.
This decreased economic activity can be explained by the increased activity
in the construction industries, which are drawing away resources from other
industries.
Although there are decreases in GVA in some industries, the additional
activity due to the increased domestic expenditure has a net positive impact
in the Central Highlands for the Submitted option.
Deloitte Access Economics
16
1 Introduction
Deloitte Access Economics was commissioned by Ensham Resources Pty Ltd
(Ensham) to undertake an Economic Impact Assessment (EIA) of the
Ensham Residual Void Project (‘the RVP’). The RVP considered how to best
manage the residual voids after the conclusion of open-cut mining
operations at the Ensham Mine. The RVP submission, required under the
approved Terms of Reference, was submitted to the Department of
Environment and Science (DES, formerly the Department of Environment
and Heritage Protection) on 27 March 2019. This submission included an
EIA report undertaken in compliance with the Queensland State
Government Economic Impact Assessment Guideline (2017).
A long-list of options for the RVP had been investigated and filtered to
identify a short-list of three options for detailed assessment:6
Option 1: Landform levee
Option 2: Flood mitigation and beneficial use
Option 3: Backfill to pre-mining Probable Maximum Flood (PMF) level.
For these three options, an EIA was used to determine the regional and
state impacts of each residual void option, as required under the Project’s
Terms of Reference. The EIA included a Cost Benefit Analysis (CBA) and a
Regional Impact Analysis (RIA), thus satisfying all relevant Queensland
Government guidelines and assessment standards, including the “Economic
Impact Assessment Guideline” by the Queensland Department of State
Development, Manufacturing, Infrastructure and Planning (DSDMIP).
In accordance with the Queensland Government Guideline for economic
impact assessment, the report, “Economic Assessment of the Ensham
Residual Void Project”, undertook an assessment of the net economic
benefits of the options to the Queensland community, within a cost benefit
analysis (CBA) framework. The CBA was complemented by a Regional
Impact Analysis (RIA) that considered the direct economic and social
impacts of the options to the regional community close to the Ensham Mine
(being the Central Highlands Statistical Area 3), as recommended in the
Economic Impact Assessment Guideline. The report considered other
factors, including the financial, social and environmental impacts
associated with each option. Outcomes from this analysis was used by
Ensham to inform a Triple Bottom Line (TBL) assessment of each option, as
that required under Condition G11 of the EA EPML00732813 (the EA).
In particular, the Option 2 EIA information was prepared on the basis of a
water reservoir as the post mining land use for a number of the
rehabilitated mining areas. Water drawn under licence in large flood events
(>17,000ML flow in the river per day) would be stored in this reservoir and
then be available to generate regional agricultural benefits. Following
receipt of correspondence from the DES and the Department of Natural
Resources, Mines and Energy (DNRME) dated 10 January 2019 the post
mining land use for these rehabilitated mining areas was changed to
primarily grazing. The EIA figures for the revised post mining land use were
6 In compliance with Condition G20 of the Environmental Authority
17
recalculated by Deloitte Access Economics and included in the submission
(Stage 5 Residual Void Report) of 27 March 2019.
On 14 June 2019, Ensham received a Request for Information (RFI) from
DES, which included a request for the preparation of a supplementary EIA
to better document the costs and benefits of the Submitted option, being
the revised version of Option 2. Specifically, DES requested that the
supplementary EIA exclude any irrigation benefits from the reservoir
option. Accordingly, this report has been prepared to address the
requirement for a supplementary EIA as listed in Item (1b) of the Request
for Information (RFI) with revisions being made to the CBA for Option 2.
The revised Option 2 is referred to as the ‘Submitted option’ throughout this
report, as per the RFI from DES dated 14 June 2019. Based on the analysis
in this report, the net benefits from the Submitted option remains higher
than the other options studied in the March 2019 submission.
1.1 Report structure
The chapters of this report are structured in accordance with the
Queensland Government Guidelines for economic impact assessment and
cost benefit analysis.
The structure of this report is as follows:
Chapter 2 outlines the methodology employed in this report including
how the approach used aligns to the Queensland CBA guidelines.
Chapter 3 details the Submitted option for the RVP.
Chapter 4 presents the results of the CBA, identifying the net benefits
of the Submitted option for the Queensland community.
Chapter 5 presents the results of a RIA, including the likely economic
and social effects of the Submitted option on the regional economy
surrounding the Ensham Mine.
Appendix A provides a checklist illustrating how this report has met
the requirements of various guidelines.
Appendix B presents an overview of the CGE model.
Appendix C is a note on revised calculations related to flooding risks.
18
2 Methodology
Deloitte Access Economics has established a methodology for undertaking
this economic impact assessment (EIA) of the RVP for meeting the
requirements in the EA, specifically Conditions G16 and G20. This EIA
includes both a CBA and a RIA. This chapter reviews relevant guidelines
before discussing how these have been applied in this report.
2.1 Conditions under the Environmental Authority
(EPML00732813)
The Ensham Mine operates under EA EPML00732813. The Environmental
Authority (EA) EPML00732813 was amended in March 2017 to include
conditions requiring a scientific and environmental assessment of the
Submitted option to rehabilitate residual voids, post cession of open-cut
mining operation, in the flood plain of the Nogoa River and other voids at
the Ensham Mine.
Conditions G16 of the EA states that a RVP must be completed and
submitted to the administering authority, being the Queensland
Department of Environment and Science (DES, formerly the Department of
Environment and Heritage Protection) by 31 March 2019. The terms of the
RVP requires that the residual void following cessation of open-cut mining
operations does not cause any serious environmental harm to land, surface
water or any recognised groundwater aquifer, other than the
environmental harm constituted by the existence of the residual void itself.
The content requirements of the RVP are contained within Condition G20 of
the EA. Note that this condition has been satisfied: the analysis of options
is available in the report: “Economic Assessment of the Ensham Residual
Void Project”.
A number of the topics covered in the EA are beyond the scope of an
economic impact assessment; however; there are particular areas that are
potentially relevant to the methodology adopted in this report. These
include impacts on land resources, water resources, biodiversity,
surrounding landholders, communities, transport, air quality, noise, and
greenhouse gases. These impacts have been considered, where relevant,
as part of this economic assessment.
2.2 Relevant Guidelines
The following guidelines have been used in preparing this report:
Queensland Treasury (2015) “Project Assessment Framework guideline
– cost benefit analysis”; and
Queensland DSDMIP (2017) “Economic Impact Assessment Guideline”.
The DSDMIP guideline provides a specific framework for cost benefit
analysis and regional impact analysis prepared as part of an economic
impact analysis for large resource projects declared as coordinated
projects, while the Queensland Treasury guideline provides a high-level
framework specific for the development of a cost benefit analysis that
meets Queensland Government standards. These guidelines state the
processes and types of information and analysis needed by the Queensland
Government to inform its assessment process.
19
A full account of the requirements of these guidelines is given in Appendix
A and the relevant requirements are cross-referenced against sections of
the report.
2.3 Implication of these guidelines
Together, these guidelines set out the key requirements for this economic
impact assessment. While Appendix A contains an item by item
reconciliation of how these guidelines have been addressed or considered,
it is first worth considering their implications qualitatively.
Overall, they require the economic impact assessment be carried out using
a set of standard approaches and with consideration of certain topics. The
guidelines specify two components for the economic impact assessment as
part of an environmental impact statement: a CBA to assess the public
interest by estimating the net present value of the residual void
rehabilitation to the Queensland community, and a RIA to assess the likely
impacts of the rehabilitation to the locality.
Following the guidelines for CBA, the analysis involves:
establishing a status quo against which to assess the economic and
other impacts of changes due to the RVP;
defining the scope of the Submitted option to the RVP including the
inputs required to achieve the RVP objectives;
quantifying changes resulting from the Submitted option relative to the
current status quo with respect to both benefits and costs, including:
– economic resource cost such as capital expenditure and operating
costs;
– impact on existing landholders;
– economic benefit such as income to workers and suppliers;
– economic, environmental and social impact on regional community;
– potential economic benefits such as royalties and corporate income
tax from additional coal output in underground operations; and
– externalities including environmental and social impacts;
estimating the monetary value of these changes using market prices,
where available, otherwise using imputed prices or a qualitative
assessment;
consolidation of values by applying an appropriate discount rate to
estimate the net present value of the Submitted option’s future net
benefits;
estimating the net present value of net benefits of the Submitted
option;
undertaking a sensitivity analysis on the key variables in considering
uncertainties related to specific benefits and costs;
assessing the distribution of benefits and costs across different groups
and geographic levels; and
reporting of results, including unquantified impacts, so as to include all
material that may be relevant to the decision maker.
The Submitted rehabilitation option is described in Chapter 3. Chapter 4
then covers the identification, quantification, consolidation and reporting of
the incremental costs and benefits relating to the Submitted option. In
particular, the CBA has been prepared with respect to the net benefits
attributable to Queensland, which is the community of interest specified in
the Queensland DSDMIP (2017) and Queensland Treasury Guideline (2015)
20
guidelines. This means that the benefits and costs estimated in the CBA are
those that accrue to the Queensland community only.
As suggested in the guidelines, the results from the CBA contain much of
the information required for the RIA analysis. The RIA translates the effects
estimated at the state-wide level into the impacts on the communities
located near the Ensham Mine.
The assessment of the consequences of the Submitted option on the local
and regional economies, in accordance with the Queensland DSDMIP
(2017) guidelines are presented in Chapter 5.
Following the guidelines for RIA, our analysis involves:
defining the spatial area and population groups to be included and
analysed;
quantitatively and qualitatively analysing the local effects relating to:
– local employment, such as workers employed under the Submitted
option who are ordinarily resident in the locality, as well as the
expenditure of additional labour earnings by both local and non-
local workers in the local economy;
– non-labour expenditure, such as purchases made in the locality
relating to the construction and operations activity attributable to
the Submitted option;
– other local industries, such as the impact of the Submitted option
on agriculture or tourism in the local area, and potential temporary
impacts on food and housing markets for local residents; and
– the long-term and temporary positive and negative externalities
that the Submitted option could create in the locality, including
environmental and social impacts;
an analysis of flow-on effects, including indirect impacts resulting from
the Submitted option due to adjustments in the economy such as price
movements or changes in labour demand and supply.
The RIA draws on material presented in the CBA – for example, the CBA
already requires that externalities relating to the Submitted option are
identified and quantified. The RIA includes the portion of these externality
benefits or costs that are incurred within the local and regional economies.
Qualitative impacts in the CBA are also discussed qualitatively in the RIA
where they are incurred in the local area.
The following section sets out our approach for ensuring that all the
relevant requirements of the EA and relevant guidelines are covered within
the CBA and RIA presented in this report.
21
3 The Submitted
option for the RVP
The CBA methodology described above provides a structured approach to
assessing the Submitted option. Using the same methodology in the
“Economic Assessment of the Ensham Residual Void Project”, it was
determined that the Submitted option is likely to result in the highest net
benefit overall and to the Queensland community. This was found to be the
case, regardless of whether the water reservoir was available to be used
for irrigation purposes. Note that the figures reported in present value
terms are in 2018 dollars. This is to ensure that the figures are in the same
year and are comparable to the figures reported in the previous
submission: “Economic Assessment of the Ensham Residual Void Project”.
Ensham has a statutory obligation under the EA, to rehabilitate the open-
cut mine following cessation of mining operations in 2022. As such,
continuation of the current status quo is not a viable option. On this basis,
this CBA does not present a Base Case for determining the state of the
world without the RVP. The Submitted option represents a distinct state of
the world project.
This chapter defines both the current status quo and the Submitted option.
3.1 Current status quo
The Ensham Mine is an open cut and underground bord and pillar coal mine
located approximately 35km east of Emerald (in Central Queensland). It is
operated by Ensham Resources Pty Ltd (Ensham), a wholly owned
subsidiary of Idemitsu Australia Resources Pty Ltd (Idemitsu), on behalf of
the Ensham Mine joint venture (JV) partners. The JV partners, and holders
of the Environmental Authority, are Bligh Coal Limited7, Idemitsu and
Bowen Investment (Australia) Pty Ltd. Together, Idemitsu has 85% equity
in the Ensham Mine partly through its subsidiary company, Bligh Coal
Limited. Idemitsu is wholly owned by Idemitsu Kosan Global, a Japanese
listed company. Bowen Investment is wholly owned by LG International, a
Korean listed company.
The EA, dated 9 August 2018, is the relevant environmental authority
under which Ensham operates the mine and covers the following mining
leases.
Open-cut operation: ML 7459, ML 7460, ML 70326, ML 70049
Underground operation: ML 70365, ML 70366, ML 70367
The EA was amended in March 2017 to include conditions requiring a
scientific and environmental assessment of the Submitted option to
rehabilitate residual voids in the flood plain of the Nogoa River and other
voids at the Ensham Mine.
7 Idemitsu has 85% equity in Ensham partly through its subsidiary company, Bligh Coal Limited
22
Condition G16 of the EA states that a RVP must be completed and
submitted to the administering authority for review and comment by 31
March 2019.
The purpose of the RVP is to ensure that the residual void following
cessation of open-cut mining operations does not cause any serious
environmental harm to land, surface water or any recognised groundwater
aquifer, other than the environmental harm constituted by the existence of
the residual void itself. The minimum content requirements of the RVP are
contained within Condition G20 of the EA.
In accordance with the terms set out in the EA, the RVP has been divided
into five stages. This economic assessment forms part of the technical
assessments that will inform Stage 4. The five stages are:
Stage 1 – Project definition and options identification
Stage 2 – Preferred options technical studies
Stage 3 – Preferred options detail design
Stage 4 – Most preferred option identification
Stage 5 – Regulatory documentation.
Under the terms of existing MLs, Ensham is permitted to mine coal in the
open-cut mine to 2022 and mine coal in the underground mine to 2028.
Ensham is currently seeking an extension of the underground mining lease
beyond 2028 to 2031. Deloitte Access Economics has been advised by
Ensham to assume an extension of the underground mining lease, and that
mining operations will continue until 2031 as the current status quo.
3.2 The Submitted option
This supplementary EIA documents the costs and benefits of the Submitted
option, which excludes any irrigation benefits from the reservoir. The CBA
therefore excludes any activities relating to the set up and operation of
water infrastructure, as well as the subsequent benefits from irrigation.
A summary of the scope of works and associated timing of the submitted
rehabilitation option is provided below in Table 3.1. A map of the relevant
residual voids (also referred to as ‘open cut pits’) to rehabilitate, as part of
the RVP, is presented in Figure 3.1.
23
Overview of the submitted RVP option and its implications on existing
operations
The Submitted option (Cattle grazing)
Open mine rehabilitation (RVP)
Summary of work To utilise landform levees with a final land use outcome of grazing. The redesigned landform will
deliver better post-mining land suitability for cattle grazing than the land pre-mining for the area.
Duration of RVP work 2020 – 2034 (15 years)
Relevant pits ML 7459 (pits A, B, C, D, and potentially E)
Detailed scope of work Bulk of rehabilitation earthwork activity is from
2020 to 2034 Labour is required from 2020 to 2034 to
rehabilitate the residual voids Overburden emplacement areas behind the
existing levee are reshaped in a manner that achieves the minimum stable landform slope requirements
Mine infrastructure is removed in 2034
Pits E, Y and F, which lie outside of PMF, would
be subject to rehabilitation in accordance with
the existing Rehabilitation Management Plan
A biodiversity corridor will be developed
adjacent to the highwall between Corkscrew
Creek and the Nogoa River, which would reduce
any visual impacts that may be associated with
the rehabilitated landforms.
Mining operations
Life of mine Open cut mining operation to 2022 (as with
current ML conditions).
Underground mining operation to 2031
(extension of existing ML beyond 2028 to
2031).
Extraction of around 64.3 Mt of saleable thermal
coal.
Source: Deloitte Access Economics.
24
Figure 3.1 Location mapping of open cut pits in Ensham Mine
Source: Ensham. (2017) Residual Void Project Briefing Note 4 – Stage 3 Preferred Options
Descriptions and Rationales.
25
3.3 Other options
As outlined in the Queensland Treasury (2015) guideline, a CBA typically
requires the assessment to report on all feasible project options. This report
only evaluates the Submitted option for the RVP, as put forward by the
Proponent.
In the “Economic Assessment of the Ensham Residual Void Project” report,
Deloitte Access Economics evaluated three options.
landform levee - augmenting the design of existing flood levees to
develop permanent landforms along the existing levee alignment to
provide flood immunity for the 0.1% Annual Exceedance Probability
flood event having had consideration of the risk of a PMF level event.
flood mitigation and beneficial use - utilising post-mining voids to form
water storages to capture a proportion of high flow flood water and
store this water for potential beneficial reuse.
backfill to PMF - backfilling residual mining voids located within the pre-
mining flood plain up to the elevation of the original flood plain within
the lateral extent of the pre-mining PMF level.
Beyond the above three options, Deloitte Access Economics was not asked
to consider alternative project options. It is noted, however, that the
Proponent did consider a number of alternatives for the RVP. In selecting
the above three options, we understand consideration was given to:
minimisation of the final void area and volume;
achieving long term water balance in the void;
stability of the pit wall stability;
minimisation of risk of flood interaction;
support for native flora and fauna; and
meeting the void rehabilitation success criteria as outlined in Appendix 4
of the EA. This included consideration of alternative rehabilitation
construction works, flood levee design and augmentation, landform
layouts and infrastructure arrangements to achieve the objective of the
RVP.
An issue to be clarified is the geographic scope of the CBA. This is important
as it draws a line for which benefits and costs are included in the analysis
and which are excluded. For example, if the scope of the CBA is defined as
the State of Queensland, rates payable to the Central Highlands Regional
Council and royalties payable to the Queensland Government should not be
included in the analysis in Chapter 5 (the Regional Impact Analysis). As the
cost to the Project Proponents is offset by the benefits to the government,
these transfer payments cancel out.
As the CBA is being developed for compliance with Queensland Government
processes, the scope of the CBA will generally be the State of Queensland.
However, the fact that the guidelines and requirements discussed in
Chapter 2 do not fit neatly into a traditional CBA framework means that the
analysis will sometimes require consideration of effects for particular groups
within the scope. For example, Chapter 5 mostly focusses on transfer
payments within Queensland. Whenever this is the case we have attempted
to clearly identify which parties are being analysed and where they are
likely to be located.
26
4 Net benefit to
Queensland
This chapter presents the results of the CBA, which assesses the net
present value of the Submitted option to the Queensland community. This
chapter focuses on the assessment of direct impacts, and quantifying those
items wherever possible and then deriving the share of each item that is
attributable to Queensland. Assessment of the indirect impacts of the
residual void rehabilitation is presented in section 5.6.
The option that is being submitted is expected to generate a total net
economic benefit for the Queensland community of approximately $288
million (in present value terms). This net economic benefit is comprised of:
Residual value of land of $2.7 million
Reduction in flooding risks of $0.5 million
Royalties payable to the Queensland Government of $259 million
Company income tax payable to Queensland of $25 million
Local government rates payable to the Central Highlands Council of $1.5
million.
The steps in this analysis and the detailed results are described in this
chapter.
4.1 Scope of the cost benefit analysis
The scope of this CBA is defined by:
Current status quo – defining the ‘business as usual’ mining operations.
Project Case – full specification of the Submitted RVP option to be
assessed, including its implication on mining operations.
Community of interest – defining the community for which the benefits
and costs of the project should be assessed. In this case, it is the
Queensland community.
The definitions of the current status quo and the Submitted option for this
CBA are described in Sections 3.1 and 3.2 respectively. The community of
interest for the CBA is the Queensland community, and the regional
community of interest for this CBA is the Central Highlands Statistical Area
3, in accordance with that prescribed by the Queensland Government
(2017) guideline (See Section 2.2).
4.2 Identifying costs and benefits
The costs and benefits considered in this CBA are set out in Table 4.1.
In recognition of the broad range of impacts of the Submitted option, costs
and benefits have been separated into two broad groupings: those benefits
and costs that arise directly as a result of the rehabilitation program
proposed; and, those benefits and costs that arise from operating the
Ensham mine to 2031.
Within each broad grouping, costs and benefits are then further broken
down into categories according to the part of the community that it will
accrue to. For instance, the RVP Owners (Idemitsu and Bowen Investment
(Australia) Pty Ltd) will bear the rehabilitation costs and maintenance costs
27
and receive the net producer surplus from the mining operation. Royalties
and company income tax will be paid to the Queensland and Australian
Governments respectively. Other third parties that may be impacted by the
rehabilitation include landholders and residents in the regional community.
This categorisation assists in apportioning the share of the net benefits of
the RVP to the Queensland community.
Section 4.3 describes the techniques used to value each of these items and
provides the justification behind the classification of each as a net cost or
net benefit.
As recommended in the Queensland guidelines, where it is difficult to place
a value on a particular cost or benefit of the Project Case, a supplementary
qualitative measure is undertaken. These items are considered in Section
4.3. In some cases these items have been considered qualitatively because
there is expected to be no significant difference in outcomes under the
current status quo and the rehabilitation (such as noise and visual amenity)
or because there is no reliable method available to value them in these
particular circumstances (such as landform stability and farming efficiency).
Benefit and cost items considered in this CBA
Item Benefit components Cost components
Open mine rehabilitation (RVP)
RVP rehabilitation cost
Bulk earthwork costs Topsoil, amelioration, seeding and ripping costs Infrastructure removal and equipment costs Overhead salaries and site on-costs Other rehabilitation costs
Residual value of land
Value of mine disturbance area rehabilitated into additional grazing land and other land types with biodiversity values
Flooding risks Benefits from decreased upstream and downstream flooding risk
Externalities Greenhouse carbon emissions from
rehabilitation works
Mining operation impacts
Net producer surplus Gross mining revenue
Operating costs Capital costs Taxes (Australian, state and local) Royalties
Local Government rates
Rates payable to Central Highlands Regional Council
Royalties Royalties payable to Queensland Government
Company income tax Company income tax payable to the Australian Government
Source: Deloitte Access Economics.
28
4.3 Costs and benefits to Queensland
This section details the methods used to value the costs and benefits under
each item identified in Table 4.1, and the approach used to apportion a
share of each value to the Queensland community. The quantification of
costs and benefits has relied on a range of approaches and data sources,
including financial information and technical assessments provided by
Ensham, government data publications and non-market values published in
the literature.
All present values reported in this section are calculated using a 7% real
discount rate, are reported in 2018 price terms, and are discounted back to
the start of 2018. The period of analysis is from 2018 to 2060, based on
available forecasts of the cost of greenhouse gas emissions.
4.3.1 Open cut mine rehabilitation impacts
The impact of the rehabilitation of the residual void depends on its ultimate
effect on final landform, its ability to mitigate floods and its effect on
environmental values. The methods used to quantify the costs and benefits
associated with the rehabilitation are discussed in the sections below.
Rehabilitation costs
The total cost of rehabilitation as part of the RVP, in present value terms, is
estimated at $148.9 million for the Submitted option. This represents the
cost to Project Proponents for undertaking the RVP. Notably, the cost of
rehabilitation under the Submitted option is lower than both Options 1 and
3 which is estimated at $194.2 million and $333.1 million in present value
terms respectively.
To determine the amount of rehabilitation costs attributable to Queensland,
we need to look at the ownership structure of the Ensham Mine and
associated infrastructure. As the Ensham Mine is ultimately owned by
Idemitsu (85%)8 and Bowen Investment (Australia) Pty Ltd (15%), and
both of these companies are foreign listed companies, we have assumed
0% of the rehabilitation costs are borne by Queensland. As a result, no
rehabilitation costs are attributable to Queensland. This is a conservative
assumption as it is possible that some of the firm’s ultimate shareholders
are located within Queensland.
Having said that, understanding of the key components of the rehabilitation
work program is important to address. It gives an understanding of the
scale of works required and the resources, including labour and capital that
will be deployed by the proponent.
Rehabilitation under the proposed option is expected to take place over a
15-year period, by beginning two years earlier in 2020 and finishing in
2034.
Key components of the rehabilitation cost include:
bulk earthwork costs;
topsoil, amelioration, seeding and ripping costs;
infrastructure removal costs; and
overhead costs.
The cost of rehabilitation is largely dependent on the extent of the
earthworks required. This involves the movement of spoil and augmentation
8 Idemitsu has 85% equity in Ensham partly through its subsidiary company, Bligh Coal Limited
29
of existing flood levees to create the final landforms. In addition to the
earthworks, the rehabilitation also includes costs relating to topsoil,
amelioration, seeding and ripping (for example; the planting of tree and
pasture to produce a final landform suitable for grazing), infrastructure
removal and associated overhead costs. Note, the rehabilitation cost does
not include any cost related to establishing and operating water storage
infrastructure, as was the case in the original analysis of Option 2 in the
“Economic Assessment of the Ensham Residual Void Project”.
The total cost of earthworks under the Submitted option is $103.8 million in
present value terms. The cost is similar to Option 1, $146.7 million in
present value terms, as the work required are similar in nature. That is, the
Submitted option and Option 1 involves augmenting existing flood levees to
create the final landforms and reshaping the mine walls. In contrast, the
cost under Option 3 is significantly higher, as all pits within the flood plain
need to be backfilled to its original level (i.e. the ‘Pre-mining PMF level’), in
addition to the work on flood levees.
The cost for topsoil, amelioration, seeding and ripping is estimated at $30.8
million for the Submitted option, in present value terms. Additionally,
rehabilitation will require the removal of infrastructure currently used in
sustaining the operation of the mine, such as conveyors and washing
plants. The Submitted option involves the removal of mine infrastructure
over three years from 2032 to 2034. This is estimated to cost $6.3 million
annually, or $6.5 million in total in present value terms. While the total cost
of infrastructural removal is identical under all options, the cost in present
value terms is higher under the Submitted option due to the removal taking
place earlier than in Option 1 and 3.
Associated with the labour costs are a number of overhead and on-costs,
including accommodation, travel expenses, and salary payments. Total
overhead costs, in present value terms, is $7.9 million for the Submitted
option.
Each of these costs are shown in present value terms in Table 4.2,
alongside a comparison to Options 1 and 3.
30
Calculation of rehabilitation costs
Rehabilitation Costs Submitted
option
($m, NPV)
Option 1
($m, NPV)
Option 3
($m, NPV)
Bulk earthwork costs -103.80 -146.67 -257.95
Direct seeding costs -30.80 -15.11 -19.23
Infrastructure removal
costs
-6.45 -4.60 -4.60
Overhead costs -7.85 -27.88 -51.29
Total -148.91 -194.26 -333.06
Source: Ensham (2019). Deloitte Access Economics calculations.
Benefit to workers
The workers needed for rehabilitation will be drawn from the existing
workforce of the open-cut mine. The benefits to workers from engaging in
the rehabilitation work include any wage premiums paid above the
minimum wage that they could accept elsewhere in the Central Highlands
region.
It is conservatively assumed that workers engaged in the rehabilitation
work are not expected to receive a wage premium. This assumes that
workers will receive a wage consistent with market rates. To provide an
illustration, an average net market wage for the mining industry in the
region is estimated to be $88,747.69 after tax (or $124,982.69 before tax).
This represents the average annual income in the mining industry within the
Central Highlands region as at the time of the 2016 Census (ABS) adjusted
to 2018 prices using the Private Sector Mining Wage Price Index (ABS,
2018), and discounted for predicted income tax payable using ATO (2018).
This approach assumes that there is no wage increase for rehabilitation
workers already working in the mining sector. Any wage increase accrued
from gaining employment in the rehabilitation project by people outside the
mining sector, or from other areas of Queensland, is compensation for
changes in working conditions, rather than a wage premium.
Benefit to suppliers
To estimate the net benefits to suppliers, it is necessary to examine the
extent to which rehabilitation will deliver additional producer surplus
relative to what would otherwise be received in the current status quo.
As the outcomes for suppliers under the current status quo are not readily
observable, this benefit is difficult to measure. Accordingly, it is
conservatively assumed that suppliers will earn similar margins relative to
what they could have received otherwise.
Residual value of land
The rehabilitation work will also provide value through the creation of
alternative types of land upon the completion of mining activities. This
value primarily depends on the ability of the land created at the end of the
mining activity to support future activities of economic, environmental or
31
social value. If the land is not suitable for further use, such as agricultural
or biodiversity conservation, then it is unlikely that there would be any
substantial demand or willingness to pay for it. In this case, the value of the
land created will be zero.
Ensham advised that the land created as a result of the rehabilitation work
would include native grassland that is suitable for cattle grazing.
Chart 4.1 below presents the details of the anticipated timing of native
grassland to arise at the end of the rehabilitation work under the Submitted
option. This is dependent on timing of direct seeding work and the lag time
required for direct seeding work to settle. This information can be utilised to
ascertain the value of the residual land created during the rehabilitation.
Chart 4.1 Grassland resulting from the rehabilitation under the Submitted option
Source: Ensham (2019).
To value the land, we relied on market prices where available. Accordingly,
the social value of native grassland, has been estimated using data from
Rural Land. Specifically, Rural Land provides information on historical sales
price of farmland in Queensland by local government areas, which can be
used as an estimate for the value of a hectare of grassland in Central
Highlands. The median sale price of farmlands in Central Highlands in 2017
is $2,054 per hectare (Rural Bank, 2017). Indexing this value by the
consumer price index gives a value of $2,080.33 per hectare in 2018
(Australian Bureau of Statistics, 2018).
Applying this value to the areas of land that will be created during
rehabilitation, produced an estimate of the residual value of land of $2.74
million in present value terms.
Flooding risks
The resultant landform, post-rehabilitation, has implications for the risk of
flooding for the land surrounding the Nogoa River, an area containing
extensive agricultural and pastoral landholdings.
Two major flooding events - one in 2008 and another in 2010 - recently
affected this area, causing extensive damage to agricultural, pastoral,
industrial and residential areas. The 2008 event saw the Nogoa River height
peak at 15.36 metres, while the 2010 event set a new record at 16.05
metres (Bureau of Meteorology, 2011). This record event in 2010 damaged
32
95 per cent of Emerald’s businesses and affected over 1,000 homes in the
town (ABC, 2011).
However, it was the 2008 event that was particularly severe for the Ensham
mine operations, with entire pits and a major dragline becoming inundated.
The recovery project was estimated to have cost over $300 million
(Flagstaff Consulting, 2018). It involved pumping extensive amounts of
water from the pits; removal of mud and silt; rebuilding of access roads,
drainage and other infrastructure; recovery and rebuilding of the
submerged 1,700t dragline; and rebuilding 10km of levees to a higher level
and specification.
Assessment (Hydro Engineering & Consulting Pty Ltd, 2018) shows that the
rehabilitation will reduce downstream flooding risks for Emerald. Drawing
on annual flood exceedance probability (AEP) estimates provided by Hydro
Engineering & Consulting Pty Ltd (2018), it is assumed that, on average, a
reduction of 43 hectares of irrigated pasture land and 29 hectares of
irrigated cotton land will be affected by a flood in any given year under the
Submitted option.
To estimate the cost of flooding risks to the surrounding area, gross
margins per hectare of land were used to measure foregone revenue. For
pastures, this approach required identification of whether the pasture would
be irrigated pasture or non-irrigated pasture and the duration of inundation.
For example, the cost of flooding to non-irrigated land for a period of less
than 5-7 days was assumed to be zero, rising to $34 for inundation longer
than 5-7 days (Department of Infrastructure and Regional Development,
2001). In contrast, the burden to irrigated land is estimated to be $103 per
ha for an inundation period of less than 5-7 days and $424 for lengthier
periods.
A similar methodology was used to estimate the cost to land used for crops,
with a gross margin per hectare used to calculate the foregone profit to
landholders due to the flooding impact. Assuming most of the irrigated
crops affected are cotton, foregone profit for cotton farmers from flooding is
estimated to be $3,500 per hectare (The State of Queensland, 2018).
Based on the above estimates, the benefit from reduction in flooding risk
(relative to pre-mine conditions) in perpetuity is estimated to be $0.5
million in present value terms. It is assumed that the flooding risk changes
after rehabilitation works are completed, and so, the Submitted option
realises the benefit from 2035 and onwards. Option 1, however, is expected
to have rehabilitation works completed in 2045 and therefore realises
benefit from reduction in flooding risk from 2046 and onwards. Due to an
earlier completion of rehabilitation works under the Submitted option, the
estimated benefit under the Submitted option is higher than in Option 1,
notwithstanding both options utilising the same landform levees.
Externalities
4.3.1.6.1 Greenhouse gas emissions
The rehabilitation project will generate carbon emissions from diesel
consumption required to fuel the earthworks activities. Earthwork activity
for the Submitted option is between 2020 and 2034. The social costs of
additional greenhouse gas emissions resulting from this earthwork activity
is estimated to be $0.8 million in present value terms. This is less than both
Options 1 and 3 with an estimated cost of $1.7 million and $2.7 million in
present value terms respectively, which is the result of higher levels of
33
diesel consumption to fuel earthwork activities. To be conservative, it is
assumed that all of these costs are attributable to Queensland.9
To measure the greenhouse gas emissions produced, we used annual diesel
consumption over the life of the rehabilitation work provided by Ensham. A
total emissions figure was derived by applying average emission rates of
CO2, CH4 and N2O per litre of diesel consumed to the estimated total diesel
consumption, based on the method set out in the National Greenhouse
Accounts Factors (Australian Department of Environment and Energy,
2018).
These emissions were then valued using the forecasted European Union
Emissions Allowance Units price, based on futures derivatives published by
the European Energy Exchange. This price series was used in the review of
the NSW Energy Savings Scheme (NSW Government, 2015). The series
assumes that the cost of carbon is included in wholesale electricity prices
from 2021 onwards. When scaling up the price series developed in 2015 up
to 2018 price terms using the Consumer Price Index data (Australian
Bureau of Statistics, 2018), the estimates increase gradually from $9.60/ t
CO2-e in 2018 to $19.59/ t CO2-e in 2039. It should be noted that these
estimates are on the lower end of other forecasts, compared with those
published by the Australian Treasury for the Clean Energy Policy Scenario
and by the United States Environmental Protection Agency on the social
cost of carbon.10
4.3.1.6.2 Other externalities
Ensham has advised that other environmental, social and transport related
costs associated with the rehabilitation works will be managed within
existing approved limits set out in the rehabilitation work program. Other
externality impacts from mine rehabilitation may include:
Aboriginal and non-aboriginal heritage – Rehabilitation of the mine is
not expected to have any impacts on cultural uses. Any impacts to
heritage sites, if experienced, will be borne by the locality. However,
these costs may also be more broadly spread among individuals who
feel a cultural or historical connection to the affected sites.
Air quality impacts and ambient noise: The rehabilitation will impact air
quality and noise levels experienced within the locality. However, no
impacts are expected outside of the locality. In particular, Ensham has
indicated that technical studies undertaken as part of the RVP show
both air quality and noise impacts are within acceptable limits and in
accordance with current approvals (EA).
Biodiversity conservation impacts: the rehabilitation of the mine will
generate externality benefits through the creation of potential habitats
areas that will improve local residents’ experience of natural
ecosystems. The rehabilitation may also impact those outside of the
locality by affecting the value they attach from knowing these habitats
exist.
Traffic and transport: Traffic impacts, in terms of travel time delays
during the rehabilitation work, will mostly affect the road users within
the locality.
9 In other studies, population share is used as a proxy for attributing externality impacts to local communities such as Central Highlands and NSW. 10 Please refer to the workbooks that underpins the Guidelines for the economic assessment of mining and coal seam gas proposals, see; http://planspolicies.planning.nsw.gov.au/index.pl?action=view_job&job_id=7312.
34
Visual amenity: Impacts to visual amenity, from augmentation of
existing levees (negative impact – reduced amenity), or the
development of pit lakes (positive impact – improved amenity), are
likely to only affect those in the local community.
4.3.2 Mining operation impacts
The sections below detail the methods used to quantify the costs and
benefits of the Ensham open cut and underground mining operations,
assuming Ensham obtains approval for extending the life of the
underground mine from 2028 to 2031. Ensham is currently in the process of
seeking an extension of the underground mining lease to 2031.
Presentation of the benefits and costs to 2031 therefore represents current
status quo and is not impacted by the choice of the submitted rehabilitation
option.
The net producer surplus and net benefit to Queensland is driven by the
amount of labour required to rehabilitate the mines, as this affects the
calculation of payroll tax and local government rates. Based on data
provided by Ensham, the Submitted option is assumed to employ 444 full-
time equivalents (FTE). Labour required to operate the open-cut mine and
underground mine is assumed to be 6,643 FTE over the remaining life of
the mine corresponding to an average annual FTE of 474.
Net producer surplus attributable to Queensland
The net producer surplus attributable to the Queensland community is
dependent on the ownership structure of the Ensham mine and associated
infrastructure.
As noted in Chapter 1, the Ensham Mine is ultimately owned by Idemitsu
(85%)11 and Bowen Investment (Australia) Pty Ltd (15%), and both of
these companies are foreign listed companies, we have assumed 0% of the
net producer surplus are borne by Queensland. As a result, no net producer
surplus resulting from the rehabilitation is attributable to Queensland. This
is a conservative assumption as it is possible that some of the firm’s
ultimate shareholders are located within Queensland.
Having said that, it is important to understand the key components of net
producer surplus and the calculations that have been applied to estimate
these figures. These estimates inform calculations of revenue, costs,
royalties, income tax, and the overall net benefit of the rehabilitation. The
assumptions underlying each component of the total net producer surplus
estimate are documented on the following pages.
11 Idemitsu has 85% equity in Ensham partly through its subsidiary company, Bligh Coal Limited
35
Calculation of total net producer surplus
Item Submitted option($m, NPV)
Revenue 3,849.82
Gross mining revenue 3,849.82
Costs -3,010.20
Operating costs -2,577.80
Capital costs -432.41
Taxes -151.38
Payroll tax -25.77
Local Government rates -1.51
Corporate tax -124.11
Royalties -258.61
Ad valorem coal royalties -258.61
Net producer surplus 429.62
Note: Figures may not sum due to rounding and some figures are rounded.
Source: Deloitte Access Economics calculations.
Calculating the share of net producer surplus attributable to
Queensland
Submitted option
($m, NPV)
Net producer surplus ($m, NPV) 429.62
Australian share of Project’s ownership (%) 0%
Queensland share of Australia (%) 20%
Queensland share of Project’s ownership (%) 0%
Value of net producer surplus attributable to Queensland ($m, NPV)
$0
Source: Deloitte Access Economics calculations.
4.3.2.1.2 Revenue
Gross mining revenue is estimated to be $3,849.8 million in present value
terms. Based on production estimates provided by Ensham, 64 Mt of
thermal coal will be produced between 2018 and 2031 from the open-cut
and underground mines.
The amount of coal produced in each year is multiplied by the forecast price
for thermal coal to give the gross revenue. The underlying prices for
projecting revenue is based on price forecasts provided by Ensham. The
proponent has assumed that price for 6322 kcal/kg thermal coal in 2018 is
36
$88 USD per tonne. This is assumed to fall to $75 USD per tonne in 2019
and then $72 USD per tonne in each of the following years to 2031. These
prices are then converted to Australian dollars using an assumed exchange
rate of $0.80 USD/AUD in 2018 and a constant rate of $0.78 USD/AUD for
each year after that. These exchange rate assumptions have been provided
by the Proponent and align with their internal financial planning and
analysis.
4.3.2.1.3 Costs
The costs to operate the open cut mine to 2022 and the underground mine
to 2031 are $2,577.8 million in present value terms. This cost estimate
encompasses the expenditure incurred when extracting coal and processing
it into saleable product, administration costs, and costs associated with
distribution and selling.
Capital costs of continued mining operations are estimated to be $432.4
million in present value terms. This value is inclusive of expenditure to
sustain site infrastructure and operations.
4.3.2.1.4 Taxes
Corporate income tax payable is estimated at $124.1 million in present
value terms for continued mining operations. The method used to develop
this estimate is outlined in Section 4.3.2.5.
Royalties for the extraction and sale of coal have been estimated by
applying a royalty rate based on the average price per tonne of coal, after
accounting for allowable deductions. A detailed description of the method
used to calculate total royalties paid is provided in Section 4.3.2.3.
Payroll tax has been estimated as a function of expected employee wage
costs, estimated with reference to ABS Census data, payroll tax threshold in
Queensland, and data on FTEs provided by the proponent.
Estimation of the local government rates payable are based on the amount
of FTE required. The Central Highlands Regional Council collects local
government rates based on a three-tiered approach, with each tier
corresponding to band of labour and local government rates payable per
annum. Detailed description of the method used is provided in Section
4.3.2.4.
Subtracting the total costs, taxes and royalties from the total gross revenue
gives a net producer surplus $429.6 million for the Submitted option in
present value terms.
Royalties
The continued operation of the open cut mine to 2022 and the underground
mine to 2031 is estimated to generate royalties for the Queensland
Government of around $258.6 million in present value terms.
The components used to estimate the royalties include:
Gross mining revenue – this is the total value received from the saleable
coal in a given year. This is calculated using the price and quantity
assumptions detailed in Section 4.3.2.1.
Allowable deductions – under the Mineral Resources Regulation 2013,
some mining expenses can be deducted from the gross revenue before
the royalties payable are calculated. This includes port and shipping
charges, coal levies, and costs relating to the late despatch of coal from
a port (demurrage).
37
Effective royalty tax rate - the royalty rate payable to Queensland is
calculated based on the average price per tonne of coal in a given year.
For the first $100 of the coal’s value, the rate is 7%. For the next $50 in
value (i.e. between $100 and $150 per tonne) the rate is 12.5%, and
for any value over this amount (>$150 per tonne) the rate is 15%.
For example, the average price per tonne of coal in 2018 is $112 AUD.
Therefore, $7 in royalties is paid for the first $100 of value, and $1.5 is paid
on the remaining value of the price ($12). The total royalties paid for each
tonne of coal sold at $112 is $8.5. The effective royalty rate paid on the
gross value of the coal sold at this price is equal to 7.6%.
Payroll tax
Payroll tax is estimated to be $25.8 million for the Submitted option in
present value terms. Estimates of payroll tax were produced using the
employee count (FTE) required to maintain open cut and underground
operations and rehabilitate the residual voids, wages payable, and
applicable payroll tax rate for the total annual wage bill.
As set by Business Queensland, the payroll tax rate is 5% on wages above
an annual threshold of $1.1 million. Wages exceed this threshold in all
years of mining operation from 2018 to 2031. For payroll tax attributable to
rehabilitation works, timing of payroll tax payable is consistent with the
profile for labour required to rehabilitate the mine, as presented Table 3.1.
Local government rates
Local government rates payable to the Central Highlands Regional Council
are estimated to be $1.51 million in present value terms under the
Submitted option.
This estimate was produced using the 2018/19 rates schedule provided by
the Central Highlands Regional Council that sets out the minimum rates
that apply to each of the differential rate categories.
Applicable minimum rates per annum for the relevant categories are:
Coal mining: 100 – 500 workers is $97,052; and
Coal mining: 501 – 1000 workers is $233,841.
In determining the number of employees for which rates should be charged,
Council is guided by data produced by the Department of Natural
Resources, Mines and Energy on the reported number of workers at open
cut and underground coal mines and to rehabilitate the residual voids.
Ensham has forecast FTE requirements that change across the operational
life of the mines and the rehabilitation period.
Local government rates have been determined in each year using the FTE
forecasts provided by Ensham and the Central Highlands Regional Council’s
rates schedule.
Corporate income tax
The company income tax payable is estimated at $124.1 million in present
value terms.
This estimate was produced by applying the 30% corporate tax rate to an
estimate of taxable income in each year. For the purpose of this analysis,
taxable income was estimated as gross mining revenue, less total cash
costs (inclusive of distribution and selling costs, washing and hauling costs,
and mine operation costs), severance/closure costs and non-cash costs
such as depreciation and amortisation. Calculations of annual income tax
38
payable also took into account accrued tax losses. The exclusion of interest
deductions indicates that these estimates are likely to be somewhat
overestimated.
On the basis that Queensland accounts for approximately 20% of the
Australian population, the share of company income tax attributable to
Queensland is estimated to be $24.8 million in present value terms.
4.4 Overall cost benefit analysis results
Given the values assigned to each item in Section 4.3, it is estimated that
the Submitted option will deliver a net economic benefit to the Queensland
community of approximately $287.4 million in present value terms.
Table 4.5 presents the overall results of the CBA, while Table 4.6 provides a
breakdown of the items by affiliation to stakeholders. Table 4.7 provides a
detailed summary of the benefit to Queensland by item based on the CBA
results presented in Table 4.5 and the attribution rates set out in Table 4.6.
Each estimate is measured in present value terms, calculated using a 7%
discount rate, in 2018 price terms, discounted back to the start of 2018.
Considering the sources of benefits to Queensland:
Net benefit was greatest for the Submitted option in the set of
rehabilitation options explored in the “Economic Assessment of the
Ensham Residual Void Project”. This is largely driven by the approach
taken to achieve the outcomes of the RVP, with minor differences on the
mining operations. These minor differences are driven by a difference in
the workforce required for rehabilitation, affecting the taxes that
Ensham has to pay.
The net benefit to Queensland is somewhat offset by the greenhouse
gas emissions that will be produced as part of the rehabilitation work.
The residual value of land under the Submitted option is valued at $2.7
million in present value terms. This option is also expected to provide a
reduction in flooding risk from up to and including a 0.1% Annual
Exceedance Probability flood event. The benefit from reduction in
flooding risk is $0.5 million in present value terms.
39
Overall CBA results
Submitted option ($m, NPV)
RVP
Benefits
Residual value of land 2.74
Flooding risks 0.54
Costs
Rehabilitation cost -148.91
Cost of GHG emissions -0.78
Net benefit -146.41
Mining operation net benefit
Net producer surplus# 429.62
Royalties 258.61
Local Government rates 1.51
Corporate income tax 124.11
Total 813.85
Total net benefit 667.44
Note: Calculation assumes no net benefit for workers and suppliers. Results are presented based
on benefits and costs to stakeholders, including Idemitsu and its joint venture partners, Queensland community, Queensland Government, and Australia. Figures may not sum due to
rounding and some figures are rounded.
# Net producer surplus excludes royalties, taxes and local government rates.
Source: Deloitte Access Economics calculations.
40
Attribution of CBA results by item
Idemitsu & JV partners
Queensland Community
Queensland Government
Australian Government
and community
RVP
Benefits
Residual value of land 100%
Flooding risks 100%
Costs
Rehabilitation cost 100%
Cost of GHG emissions
100%
Mining operation
Net producer surplus 100%
Royalties 100%
Local Government
rates
100%
Corporate income tax 20% 80%
Source: Deloitte Access Economics.
41
Net benefit to Queensland community ($ million)
Submitted option ($m, NPV)
RVP
Benefits
Residual value of land 2.74
Flooding risks 0.54
Costs
Rehabilitation cost -
Cost of GHG emissions -0.78
Net benefit 2.49
Mining operation net benefit
Net producer surplus# -
Royalties 258.61
Local Government rates 1.51
Corporate income tax 24.82
Total 284.94
Total net benefit 287.44
Note: Calculation assumes no net benefit for workers and suppliers. Results are presented based
on benefits and costs to stakeholders, including Idemitsu and its joint venture partners,
Queensland community, Queensland Government, and Australia. Figures may not sum due to
rounding and some figures are rounded.
# Net producer surplus excludes royalties, taxes and local government rates.
Source: Deloitte Access Economics calculations.
42
4.5 Sensitivity analysis
The CBA results presented above are subject to the assumptions and
valuations applied to each cost and benefit, as outlined in Section 4.3.
Accordingly, it is necessary to test the sensitivity of the estimate of net
economic benefit by also considering upper and lower bound discount rates,
and varying the size of a number of parameters of interest. This provides an
insight into the range of possible outcomes that could be expected from the
rehabilitation under the Submitted option, given a range of scenarios.
Based on the recommendations in the OBPR (2016) Guideline (see Section
2.2), sensitivity analysis has been undertaken using a lower bound discount
rate of 3% and an upper bound discount rate of 10%. It is noted that this
lower bound rate of 3% is recognised in the literature as a reasonable
discount rate to use when there is an interest in incorporating
intergenerational concerns (Arrow, 2012).
Table 4.8 illustrates the variation in the overall CBA result and the net
benefits to Queensland under alternative discount rates. In all three
scenarios, the Submitted option produces net benefits to all stakeholders
and the Queensland community as a whole. That is, the benefits from the
rehabilitation are estimated to exceed the cost borne by the stakeholders,
including the quantifiable externality costs.
In particular, for the Queensland community, the estimate of net economic
benefit ranges from: $247 million to $365 million, a respective 14%
decrease and 27% increase on the central estimate produced using the
standard discount rate of 7%.
Comparison of central CBA results with alternative discount rates
3% 7% 10%
Overall CBA result benefit ($m,
NPV)
835.28 667.44 575.48
Overall net benefit for Queensland community ($m, NPV)
364.69 287.44 246.66
Source: Deloitte Access Economics calculations.
The second necessary component of a sensitivity analysis is to also vary the
estimates for different inputs. The importance of testing scenarios is also
recognised in the relevant CBA guidelines. We have not presented the CBA
results under variations in rehabilitation costs, and revenue and costs from
mining operations. This is because these costs are not attributable to
Queensland due to the ownership structure of the Ensham Mine.
The variations undertaken as part of this analysis include:
increasing the cost of flood damage to pasture and irrigated cotton by
30%; and
decreasing the cost of flood damage to pasture and irrigated cotton by
30%.
A comparison of the overall net benefit of proposed rehabilitation under a
3%, 7% and 10% discount rate based on variation in the parameters
discussed above are presented in Table 4.9 and Table 4.10.
43
Sensitivity analysis – comparison of overall CBA result in absolute
terms
Parameter Variation in parameter
Overall net benefit ($m, NPV)
3% 7% 10%
Central CBA n.a. 835.28 667.44 575.48
Cost of flood damage to pasture and irrigated cotton
+30% 835.80 667.60 575.56
Cost of flood damage to pasture and irrigated cotton
-30% 834.75 667.28 575.41
Source: Deloitte Access Economics calculations.
Sensitivity analysis – comparison of overall CBA result in percentage
deviation terms from central case
Parameter Variation in parameter
Overall net benefit ($m, NPV)
3% 7% 10%
Central CBA n.a. 835.28 667.44 575.48
Cost of flood damage to pasture and irrigated cotton
+30% 0.06% 0.02% 0.01%
Cost of flood damage to pasture and irrigated cotton
-30% -0.06% -0.02% -0.01%
Source: Deloitte Access Economics calculations.
It can be seen that changes in the approach to value the cost of flood
damage to pasture and irrigated cotton does not change the overall CBA
result materially. The effect of the change is limited as the benefit/cost of
flooding risk is only a small fraction of the total net benefit.
A sensitivity analysis of the net benefit to Queensland using a 3%, 7% and
10% discount based on variations in the parameters discussed above are
presented below. Table 4.11 compares the net benefit to Queensland under
each scenario in absolute terms, and Table 4.12 compares the net benefit
to Queensland under each scenario in percentage terms against the Central
CBA results.
44
Sensitivity analysis – comparison of net benefit for Queensland in
absolute terms
Parameter Variation in parameter
Net benefit to Queensland ($m, NPV)
3% 7% 10%
Central CBA n.a. 364.69 287.44 246.66
Cost of flood damage to pasture and irrigated cotton
+30% 365.22 287.60 246.73
Cost of flood damage to pasture and irrigated cotton
-30% 364.16 287.27 246.59
Source: Deloitte Access Economics calculations.
Sensitivity analysis – comparison of net benefit for Queensland in
percentage deviation terms from central case
Parameter Variation in parameter
Net benefit to Queensland ($m, NPV)
3% 7% 10%
Central CBA n.a. 364.69 287.44 246.66
Cost of flood damage to pasture and irrigated cotton
+30% 0.14% 0.06% 0.03%
Cost of flood damage to pasture and irrigated cotton
-30% -0.14% -0.06% -0.03%
Source: Deloitte Access Economics calculations.
Similarly, results from the sensitivity analysis show immaterial changes
when considering the cost of flood damage compared to the central case.
45
5 Regional impact
analysis
This chapter sets out the RIA for the rehabilitation under the Submitted
option. The RIA is required pursuant to the Economic Impact Assessment
Guidelines, which requires an assessment of the rehabilitation project
across the local, regional and state economies, with specific focus on local
or regional employment effects.
The RIA is intended to be complementary to the CBA for Queensland, where
no single methodology is mandated but rather a combination of approaches
are encouraged if they produce the necessary information for an EIA. RIA
essentially translates the effects estimated at the State level to the impacts
on the communities located near the mine site.
There are a number of important points when considering the results of the
RIA. First, the results of the RIA are not additive to those in the state level
CBA. Rather, they are already largely covered in the CBA. Second, it is not
intended that the components of an RIA can be added together to provide a
single summary measure – each item reported below presents a different
regional effect. Finally, the RIA does not measure economic welfare
outcomes.
This chapter starts with a description of the locality, defined as the Central
Highlands Statistical Area 3 (SA3), demographics of the population within
this SA3, and a description of the small Emerald Statistical Area 2 (SA2).
This is followed by an analysis of the key areas covered by the RIA: impacts
on other local industries, and associated environmental and social effects.
5.1 Background on the locality and population
The mine is situated approximately 30km east of Emerald in Central
Queensland and is contained entirely within the Central Highlands Statistical
Area 3 (SA3). This SA3 also includes the nearby localities of Blackwater,
Bluff, Comet and the Sapphire Gemfields (Anakie, Sapphire, Rubyvale and
Willows Gemfields). The population of the entire SA3 has been used to
model the impact of the rehabilitation, as labour and other expenditure is
likely to be concentrated throughout this area.
The population for the SA3 was 28,960 at the time of the 2016 Census
(ABS, 2016), indicating a population decline of approximately 0.5% per
annum between 2011 and 2016. This is well below the population growth
for the State as a whole, which was approximately 1.7% per annum from
2011 to 2016. However, with the local economy continuing to transition
following a strong mining boom, annual population growth is forecast to
recover to 1.1% to 2021.
Several other key regional statistics are included in Table 5.1.
46
Population characteristics of the Central Highlands SA3
2006 2011 2016 2006-2016 % change
Population 28,256 29,662 28,960 2.5%
Mean household size 2.7 2.8 2.7 -
Median age 31 31 n.a.
Total occupied private dwellings 12,046 13,611 14,126 17.27%
Median housing loan repayment ($/month)
1,332 1,998 1,842 32.28%
Median rent ($/week) 90 112 170 88.9%
Median household income ($/week) – Lower Hunter SA3
1,534 1,951 1,788 16.56%
Median household income ($/week) - NSW
1,033 1,235 1,402 35.72%
Source: ABS 2016 Census of Population and Housing, Time Series Profile, Cat. 2003.0.
Mining is the major industry of employment in the locality, employing
24.3% of the employed population. This is much higher than in Queensland
as a whole, where just 2.3% of the employed population work in the mining
sector. The agriculture, forestry and fishing, and retail trade industries are
the next highest employers within the SA3, at 12.8% and 8.1%
respectively.
A breakdown of the average weekly wage by industry is provided in Figure
5.1. As illustrated, ‘Mining’ and ‘Electricity, Gas, Water and Waste Services’
are the two highest paying industries in the locality. ‘Mining’ employs the
most people in the locality, totalling to 3,277 people, while ‘Electricity, Gas,
Water and Waste Services’ employs 290 people.
Figure 5.1 Central Highlands SA3 average weekly personal income by industry –
2016 ($2016)
Source: ABS 2016 Census.
47
According to the Commonwealth Department of Employment small area
labour markets data, the unemployment rate for the December 2017
quarter in the Emerald Statistical Area 2 (SA2) was 3.7%. This compares to
a state-wide average of 6.1%, and the average for the broader Central
Highlands region as a whole of 4.5% (Department of Jobs and Small
Business, 2017).
As shown in Figure 5.2, the overall level of unemployment across the
Central Highlands SA3 exhibits significant variation when viewed at an SA2
level. Emerald and the Central Highlands West SA2s have low
unemployment rates of 3.7% and 3.2% respectively; the Central Highlands
East SA2 is much higher at 8.1%. This is likely attributable to the relatively
low concentration of mining activity in the eastern section of the SA2.
Figure 5.2 Unemployment (%) by SA2 in the Central Highlands Statistical Area
Source: Australian Department of Jobs and Small Business (2017).
Unemployment in the locality has followed a similar trend across each SA2,
with the unemployment rate declining since its peak at 5.6% in the
September quarter of 2015, but has since stabilised between 4.2% and
4.5% since September 2016.
5.2 Local employment effects
One of the primary effects of the proposed rehabilitation and Ensham mine
operations on the locality is the generation of employment. The mining
operating and rehabilitation of the residual voids will both employ people
directly and generate flow on employment.
Flow on employment is generated as the expenditure on direct employment
in the local area creates additional employment within other industries.
These effects are generally estimated using Computable General Equilibrium
48
(CGE) modelling. This section deals with direct employment effects only,
while the indirect impacts are presented in Section 5.6.
If the Ensham mine does not operate and the rehabilitation work is not
undertaken, many of the employees of Ensham would likely find
employment elsewhere. These employees may work a similar role at a
different mine, or find employment within another industry. It is necessary,
therefore, to consider the net employment effects on the community.
The net benefit of employment is the additional income that the individual
would receive from working in the mine and engaging in the rehabilitation
rather than being employed elsewhere in the local economy.
The approach to measuring net effects involves:
Identifying direct employment of local residents created by the mining
operations and the rehabilitation under the Submitted option.
Comparing average incomes for employees working in the mine and
engaging in the rehabilitation against the average incomes in the
locality to estimate a net increase in income.
Average income across all industry sectors in the locality was sourced from
the 2016 ABS Census, and adjusted to 2018 prices using the Wage Price
Index (ABS 2018).
Average income data was adjusted to FTE terms, based on the reported
breakdown of full-time to part-time employees for the mining industry and
all industries in the locality (ABS 2016). It was assumed that part-time
employees would earn, on average, 50% of the income of full-time
employees in all cases. Estimates of net (post-tax) income were then
developed based on income tax estimates produced using a tax calculator.
Table 5.2 compares the average income of employees engaging in the
rehabilitation with the average income of those working elsewhere in the
mining industry locally.
Under the Submitted option, the direct employment from the locality to
operate the mine will be an average 175 FTE annually between 2018 and
2031. The rehabilitation of the open cut mine is expected to, on average,
directly employ 11 FTE annually between 2020 and 2034 from the locality.
49
Estimated rehabilitation local employment effects relative to mining
industry employment in the locality
In locality Outside locality
Direct employment (FTE) 11 19
Average net income for rehab employees (FTE) ($/year)
88,748 88,748
Average net income in mining industry (FTE) ($/year)
88,748 88,748
Average increase in net income per employee (FTE) ($/year)
- -
Increase in net income per year due to direct employment ($m)
- -
FTE equivalent - -
Source: Deloitte Access Economics calculations.
Estimated mining operation local employment effects relative to
mining industry employment in the locality
In locality Outside locality
Direct employment (FTE) 175 300
Average net income for mining operation employees (FTE) ($/year)
88,748 88,748
Average net income in mining
industry (FTE) ($/year)
88,748 88,748
Average increase in net income per employee (FTE) ($/year)
- -
Increase in net income per year due to direct employment ($m)
- -
FTE equivalent - -
Source: Deloitte Access Economics calculations.
Table 5.4 compares average income of employees engaging in the
rehabilitation with the average income across all industries in the locality.
50
Estimated rehabilitation option local employment effects relative to
average employment in the locality
In locality Outside locality
Direct employment (FTE) 11 19
Average net income for rehab employees (FTE) ($/year)
88,748 88,748
Average net income in locality (FTE) ($/year)
46,449 46,449
Average increase in net income per employee (FTE) ($/year)
42,298 42,298
Increase in net income per year due to direct employment ($m)
0.46 0.79
FTE equivalent 10 17
Source: Deloitte Access Economics calculations.
By working on the rehabilitation, employees are expected to earn an
additional $42,298 per annum over the average income of all industries in
the locality. This implies that the rehabilitation of the mine will boost net
income in the locality through direct employment.
Estimated mining operation local employment effects relative to
average employment in the locality
In locality Outside locality
Direct employment (FTE) 175 300
Average net income for mining operation employees (FTE) ($/year)
88,748 88,748
Average net income in locality (FTE) ($/year)
46,449 46,449
Average increase in net income per employee (FTE) ($/year)
42,298 42,298
Increase in net income per year due to direct employment ($m)
7.39 12.68
FTE equivalent 159 273
Source: Deloitte Access Economics calculations.
The net local employment effect is estimated as the employment income
that is in addition to average wages in the locality. This includes the net
employment effect from the rehabilitation works and the mining operations.
An additional $7.4 million in employment income is generated for the
locality from operating the mine between 2018 and 2031. For the
undertaking of the rehabilitation, the Submitted option generates an
additional $0.5 million of employment income in the locality per year,
between 2020 and 2034.
51
5.3 Non-labour expenditure effects
In addition to employment, the other major economic effect of the
rehabilitation and the operation of the Ensham mine on the locality is
expenditure on other, non-labour inputs. For example, the rehabilitation of
the open cut mine requires a range of non-labour inputs including hire of
machinery for earthworks, diesel, and payments to contractors. Expenditure
on these inputs generates local economic activity.
Table 5.6 shows the average annual local expenditure on non-labour inputs
under the rehabilitation and under mining operations.
Estimated rehabilitation and mining operation local operating
expenditure effects
Total direct expenditure (average annual $m)
In locality Outside locality
Rehabilitation 2.37 11.84
Mining operations 55.27 276.04
Source: Deloitte Access Economics calculations.
For the purposes of this analysis, estimated effects related to non-labour
expenditure is restricted to the direct expenditure in the local area. Of the
mine’s non-labour expenditure, 17% is estimated to be spent within the
locality, based on the local expenditure data provided by Ensham (2019).
Specifically, the average annual expenditure on non-labour inputs is
estimated to be $2.4 million for the Submitted option.
Assuming this local supplier share is maintained, it is estimated that
approximately the following will be spent in the locality for rehabilitating the
open-cut mine and maintaining the mine operations:
$55.3 million per year between 2018 and 2019;
$57.7 million per year between 2020 and 2031; and
$2.4 million per year between 2032 and 2034.
The rehabilitation is not likely to materially impact other local industries,
such as agriculture, tourism or business travel, given that the Ensham Mine
is likely to repurpose the existing workforce for the continued operation and
the rehabilitation of the mine.
5.4 Effects on other local industries
The rehabilitation of residual voids post-cessation of a mining project can
have effects on other local industries, even if there are no direct monetary
links between the rehabilitation work program and the local economy. This
may occur through the purchase of goods and services as inputs in the
project, the generation of additional labour earnings or through ongoing
benefits to existing landholders surrounding the RVP.
The 2017 economic impact assessment guidelines (Department of State
Development, 2017) provide some examples where a mining related project
can have effects on local industries:
Subsequent stimulus to the regional economy;
52
Displacement of a specific land use;
Effects on tourism and business travel; or
Employment change through direct labour inputs, indirect labour inputs,
and the projected effects on the local economy including housing, labour
costs and services.
The Guidelines require a qualitative discussion of these issues.
The use of land for mining will be displaced by a landform which will
generate areas for grazing and nature conservation. Furthermore, the
resultant landform is expected to reduce the flooding level when compared
with existing flood levels.
Employment effects from the rehabilitation of residual open-cut voids and
the continued operation of the mine are expected to be small relative to the
current available labour force in the locality, as the workers required are to
be drawn from the existing workforce of the mine. Therefore, there will not
be any material change to supply or demand in local markets and so it is
not expected that there will be any short run market adjustments in the
cost of living for local residents. It is not anticipated that the rehabilitation
will have any other effects on business travel, tourism or other local
industries.
5.5 Environmental and social effects
Externalities (both positive and negative) are a major way in which the
locality is potentially affected by the rehabilitation. For example,
greenhouse gas emissions and flooding impacts generated by the
rehabilitation affect those normally residing in the locality. Similarly, any
infrastructure investment made by Ensham as part of the rehabilitation
work also benefits those normally residing in the locality.
Of the environmental effects discussed in Section 4.3.1, those that create
local effects are:
greenhouse gas emissions;
flooding; and
residual value of land.
These environmental effects will be fully felt within the local area and hence
100% of the quantified impact is attributable to the locality. The total cost
of the greenhouse gas emission to the locality is estimated to be $0.8
million for the Submitted option in present value terms. This is equivalent
to an estimated average annual cost to the locality of $108,000 over the
rehabilitation period.
The residual value of land is the most notable local benefit, amounting to
$2.7 million in present value terms. The other benefit is the reduced
flooding risks, which accrues entirely to the locality. Economic values
created from the reduction in flood impacts are estimated at $0.5 million in
present value terms.
Ensham has outlined that the environmental and social related costs
associated with the rehabilitation works will be managed within existing
approved limits set out in the rehabilitation work program. Impacts to the
locality of mine rehabilitation may include:
Aboriginal and non-aboriginal heritage – Rehabilitation of the mine is
not expected to have any impacts on cultural uses. Any impacts to
53
heritage sites, if experienced, will be borne by the locality. However,
these costs may also be more broadly spread among individuals who
feel a cultural or historical connection to the affected sites.
Air quality impacts and ambient noise: The rehabilitation will impact air
quality and noise levels experienced within the locality. However, no
impacts are expected outside of the locality.
Biodiversity conservation impacts: the rehabilitation of the mine will
generate externality benefits through the creation of potential habitat
areas that will improve local residents’ experience of natural
ecosystems. The rehabilitation may also impact those outside of the
locality by affecting the value they attach from knowing these habitats
exist.
Traffic and transport: Traffic impacts, in terms of travel time delays
during the rehabilitation work, will mostly affect the road users within
the locality.
Visual amenity: Impacts to visual amenity, from augmentation of
existing levees (negative impact – reduced amenity), or the
development of pit lakes (positive impact – improved amenity), are
likely to only affect those in the local community.
5.6 Second round and flow-on effects
The DSDMIP 2017 guideline provides approaches such as CGE Modelling,
Input-Output Analysis or Partial Equilibrium Analysis can be used for
quantifying second round and flow on effects to a region. The guideline
further states that “qualitative analysis may be used to describe indirect
impacts where quantitative information is limited or unavailable” (DSDMIP,
2017).
We have used a CGE model to estimate the flow-on effects of the capital
investment, operational expenses required to rehabilitate the residual voids
under the Submitted option for Central Highlands and the broader
Queensland economy over time.
The CGE modelling has been undertaken using the same inputs and
assumptions that underpin the CBA analysis. This ensures consistency in
the methodology used to assess the broader economic impact of the
Submitted option. As such, results from the CGE modelling are impacted by
the same data limitations experienced in the CBA analysis.
5.6.1 Analytical methodology and data
CGE analysis is an extension of input output (IO) analysis in that it is based
on a database that incorporates IO tables and the transactional detail
between economic agents. In addition, CGE models also incorporate a
system of equations and modelling parameters, based on a widely accepted
body of economic theory, that model competition for resources (particularly
in labour and capital markets) between economic agents and allows for
economy-wide modelling impacts incorporating any “crowding-out” impacts
of the development.
Partial equilibrium is a subset of CGE analysis where it is developed to
specifically investigate a particular market. The use of a partial equilibrium
model limits the quantification of the impacts to the market of interest, in
this case the construction industry and mining industry, with no ability to
include impacts on other sectors of the economy.
Of particular importance to this analysis is that IO modelling would assume
an unconstrained workforce which is an unrealistic assumption given the
nature and region of this Project. Conversely, the CGE modelling framework
54
and Partial Equilibrium analysis captures the labour resource constraints
that operate in a region.
More technical detail regarding CGE modelling can be found in Appendix B.
The economy-wide impacts of the Submitted option has been projected
using the Deloitte Access Economics Regional General Equilibrium Model
(DAE-RGEM). The model projects macroeconomic aggregates such as GDP,
employment and industry gross value added for the options against a
reference case for each of the modelling years. The results are evaluated
from 2018-2034 over the construction period, reflecting both the
construction and operations associated with rehabilitate the residual void.
The model was disaggregated and customised to match the attributes of the
Central Highlands regional economy. This was done using information from
the most recent 2016 Census on the workforce population.
For the purpose of the modelling, the ‘Central Highlands’ region is defined
as the Central Highlands Local Government Area (LGA) as this is where the
activity is expected to occur. Modelling has been undertaken for the
following economic regions:
Central Highlands area — includes the Central Highlands Local
Government Area (LGA)
Queensland — includes the Central Highlands area and rest of the
State
The Rest of Australia.
The inputs used in the CGE modelling are presented in Table 5.7. Data was
supplied by Ensham relating to the capital expenditure and operational
expenditure required to rehabilitate the residual voids under the Submitted
option. This was modelled as increased investment in the Central Highlands
regional economy over the period 2018 to 2034. It should also be noted
that this investment is not assumed to add directly to the productive capital
stock of the economy; instead, it just reflects increased output.
CGE Inputs for the Submitted option
Submitted option
($m, NPV 2018-2034)
Capital expenditure 142.45
Operational expenditure 6.45
Total 148.91
Source: Ensham (2019). Deloitte Access Economics calculations.
Note: NPV calculated using a 7% real discount rate. Figures may not sum due to rounding.
The results from the economic impact analysis are presented as absolute
deviations in output, employment and industry gross value added from a
business as usual scenario where the residual voids in the Ensham Mine are
not rehabilitated.
55
Based on the inputs provided, the modelling gauges the wider economic
impacts of the residual void Options at two levels:
Direct impacts — the economic gains associated with the ‘core’
rehabilitation works, under the Submitted option.
Indirect, induced and crowding out impacts — the economic gains
in related upstream or downstream industries where the benefits
associated with increased construction activity are typically the highest.
As outlined above, the CGE modelling also captures any crowding out of
activity in other sectors of the economy as a result of the Submitted
option.
Because of these two distinct elements, the results presented in this
Chapter may not necessarily be comparable to the employment projections
from the residual voids rehabilitation outlined in other areas of this
Economic Impact Analysis, which take a narrower financial view.
5.6.2 Economic impacts – GRP
The economic impacts of the Submitted option on the Central Highlands and
broader Queensland economy are presented in this section, focusing on the
absolute deviation in economic output, employment and industry value
added. The rehabilitation option for the Submitted option is estimated to
lead to an additional of $12.9 million in present value terms over the period
2018 to 2034, under a 7% discount rate for the Central Highlands economy,
at an average of $1.6 million per year.
Chart 5.1 shows the profile of deviations for Central Highlands under the
Submitted option over the period 2018 to 2034. For the Central Highlands
regional economy, the impacts are primarily driven by the capital
expenditure for the rehabilitation of the residual void and partly by the
added operational costs by the end of the rehabilitation period from 2032 to
2034.
More broadly, the modelling indicates that Queensland’s gross state product
(GSP) would increase by $16.6 million, in present value terms, over the
period 2018-2034, under a 7% discount rate, reflecting a small degree of
positive spill over impacts in the rest of Queensland (Table 5.8).
Chart 5.1 Impact on gross regional product by the submitted option, Central
Highlands
Source: Deloitte Access Economics.
56
Impact on Gross Regional Product by the submitted option across
regions
Submitted option
($m, NPV 2018-2034)
Central Highlands 12.92
Rest of Queensland 3.63
Queensland 16.55
Source: Ensham (2019). Deloitte Access Economics calculations.
5.6.3 Employment impacts
Chart 5.2 shows that the deviation of employment impacts for the Central
Highlands over the construction period. It is estimated that the Submitted
option will create additional 25 full-time equivalent (FTE) jobs on average,
per year over the period 2020 to 2034 in the Central Highlands regional
economy. The increased employment impacts are driven by the amount of
expenditure required for construction of the final landforms over time.
Considering the employment impacts to the broader Queensland economy,
the modelling indicates that there are some positive impacts to the rest of
Queensland, over the construction period for the Submitted option (see
Table 5.9).
Chart 5.2 Impact on full-time equivalent employment by the submitted option,
Central Highlands
Source: Deloitte Access Economics.
57
Impact on full-time equivalent employment by the submitted option
across regions
Submitted option
(annual average 2020-2034)
Central Highlands 25
Rest of Queensland 15
Queensland 40
Source: Deloitte Access Economics.
Note: Queensland is the sum of Central Highlands and rest of Queensland. Figures may not sum
due to rounding.
5.6.4 Sectoral impacts
Chart 5.3 below shows the deviation in gross value added (GVA) across
sectors by the Submitted option in the Central Highlands regional economy.
As construction industry tracks closely with aggregate investment, it sees
highest economic activity increase by $22 million in present value terms for
the Submitted option, over the period 2018 to 2034. This is primarily driven
by the capital expenditure that directly supports activity in the construction
industry, which is reflected in the increased GVA. This, in turn, creates
additional demand in industries that supply construction with intermediate
inputs, such as heavy manufactures and financial, business and government
services.
Some industries, however, experience crowding out overall. That is, the
capital expenditure leads to reduced activity in some parts of the economy
as it draws productive resources away from them (either directly, or
through increased demand for inputs from other industries). For example,
coal mining industry will experience the highest decrease in economic
activity by $9 million, in present value terms, over the construction period.
This decreased economic activity can be explained by the increased activity
in the construction industries, which are drawing away resources from other
industries.
58
Chart 5.3 NPV of impact on Gross Value Added ($ million) by industry for the
submitted option, Central Highlands
Source: Deloitte Access Economics.
Note: NPV calculated over the period from 2018-34 for the Submitted option.
Though, there are decreases in GVA in some industries, the additional
activity due to the increased domestic expenditure has a net positive impact
in the Central Highlands for the Submitted option.
59
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http://www.environment.gov.au/climate-change/climate-science-
data/greenhouse-gas-measurement/publications/national-
greenhouse-accounts-factors-july-2018
Australian Department of Jobs and Small Business. (2017). SA2 Data Tables
- Small Area Labour Markets - December Quarter 2017. Retrieved
from https://docs.jobs.gov.au/documents/sa2-data-tables-small-
area-labour-markets-september-quarter-2015
Benez, J. e. (2010). Report on Quarrying and its Environmental Effects.
Bloss, M. (2014). An operational perspective of mine backfill. Mine Fill 2014,
Australian Centre for Geomachanics.
Bureau of Meteorology. (2011). Flood summary for the Nogoa River at
Emerald. Retrieved from
http://www.bom.gov.au/qld/flood/fld_reports/emerald_fact_sheet_
2011.pdf
60
Central Highlands Development Corporation. (2017, September). An
Economic Master Plan to 2047 and Action Plan for 2017-2022.
Central Highlands Development Corporation. (2018). Agribusiness
Capability Statement.
CHDC. (2018). Agribusiness Capability Statement: The Central Highlands,
Queensland, Australia. Retrieved from
https://chdc.com.au/media/2018/03/Central-Highlands-
Agribusiness-Capability-Statement-Feb18.pdf
CHRC & Department of Energy and Water Supply. (2017). Emerald regional
water supply security assessment.
Clarke, J., Greagg, P., & Leaver, A. (2011). Average rates of company tax
across industries revisited. Retrieved from
http://www.treasury.gov.au/PublicationsAndMedia/Publications/201
1/Economic-Roundup-Issue-2/Report/Average-rates-of-company-
tax-across-industries-revisited
Davidson, S. (2015). Retrieved from Official evidence on mining taxes:
2015 update:
http://www.minerals.org.au/file_upload/files/publications/Official_e
vidence_on_mining_taxes_2015_Update_SDavidson_May_2015.pdf
Department of Agricultural and Water Resources. (2011). Horticulture farms
in the Murray-Darling Basin.
Department of Environment and Heritgage Protection. (2017). Permit .
Retrieved from https://environment.ehp.qld.gov.au/env-
authorities/pdf/epml00732813.pdf
Department of Infrastructure and Regional Development. (2001). Economic
costs of natural disaster in Australia.
Department of Jobs and Small Business. (2017). Retrieved from
https://docs.jobs.gov.au/system/files/doc/other/small_area_labour
_markets_-_december_quarter_2017.pdf
DSDMIP. (2017). Economic Impact Assessment Guideline. Retrieved from
http://www.coordinatorgeneral.qld.gov.au/resources/guideline/cg/e
conomic-impact-assessment-guideline.pdf
Ensham Resources. (2017). Residual Void Project Profect Briefing Note 4 -
Stage 3 Preferred Options Descriptions and Rationales.
Ensham Resources. (2018). Ensham Residual Void Project Stage 2
Environmental Values Workshop Report.
Ensham Resources. (2018). Residual Void Project - Project Briefing Note 7 -
STage 3 Standard Introductory & Options Description Text.
Flagstaff Consulting. (2018). Ensham Mine Flood Recovery – Project
Management. Retrieved from
http://www.flagstaff.com.au/project/ensham-mine-flood-recovery-
project-management
Hydro Engineering & Consulting Pty Ltd. (2018). Final Report - Ensham Coal
Mine Residual Void Project Stage 3 Catchment Hydrology and Flood
Modelling.
61
Hydro Engineering & Consulting Pty Ltd. (2018). Final Report - Ensham Coal
Mine Residual Void Project Stage 3 Void Water Quantity and Quality
Balance Modelling.
KPMG. (2017). Central Highlands Economic Master Plan.
KPMG. (2017, September). Central Highlands Economic Master Plan - An
Economic Master Plan to 2047 and Action Plan for 2017-2022.
Retrieved from https://chdc.com.au/media/2018/02/CHEMP-Final-
Report-1-September-2017.pdf
Marsden Jacob Associates. (2018, October 15).
NSW Department of Planning and Environment. (2018, April). Technical
Notes supporting the Guidelines for the Economic Assessment of
Mining and Coal Seam Gas Proposals.
NSW Government. (2015). Guidelines for the economic assessment of
mining and coal seams gas proposals, December.
NSW Government. (2015). Review of the NSW Energy Savings Scheme,
Part 2: Options Paper. Retrieved from
http://www.resourcesandenergy.nsw.gov.au/__data/assets/pdf_file
/0010/558865/part-2-options-paper-april-2015.pdf
OBPR. (2016). Guidance note - Cost Benefit Analysis. Retrieved from
https://www.pmc.gov.au/sites/default/files/publications/006-Cost-
benefit-analysis.pdf
OD Hydrology. (2018, October 17). Re: Crop irrigation requirements -
Emerald Irrigation Area.
Qld Department of Agriculture and Fisheries. (n.d.). Citrus Harvesting,
Yields and Prices. Retrieved from
https://www.daf.qld.gov.au/business-priorities/plants/fruit-and-
vegetables/fruit-and-nuts/citrus/harvesting,-yields-and-prices
Queensland Department of Natural Resources, Mines and Energy. (2018).
Permanent Water Trading annual Report Period 1 July 2017 to 30
June 2018. Retrieved from Transfer of Ownership - Water Only:
https://www.dnrme.qld.gov.au/__data/assets/pdf_file/0016/14013
16/pwtr-supplemented-annual-2017-18.pdf
Queensland Treasury. (2015). Project Assessment Framework - CBA .
Retrieved from https://s3.treasury.qld.gov.au/files/paf-cost-benefit-
analysis.pdf
Rural Bank. (2017). Australian Farmland Values 2017 - Queensland.
Retrieved from
https://www.ruralbank.com.au/assets/responsive/pdf/publications/
afv-qld-2017.pdf
Ruralco Water. (2018, September 27). Water markets. Retrieved from
Trading zone information: https://www.ruralcowater.com.au/
Shafiee, S., Nehring, M., & Topal, E. (2009). Estimating average total cost
of open pit coal mines in Australia. Australian Mining Technology
Conference 27-28 October , 134-145.
SunWater. (2017). Nogoa Mazkenzie Water Scheme.
62
SunWater. (2018, October 5). Nogoa Mackenzie. Retrieved from
http://www.sunwater.com.au/schemes/nogoa-mackenzie
Treasury, N. (2017). NSW Government Guidelines for Economic Appraisal.
Retrieved from https://arp.nsw.gov.au/sites/default/files/TPP17-
03_NSW_Government_Guide_to_Cost-Benefit_Analysis_0.pdf
63
Appendix A: Checklist
Queensland DSDMIP (2017). “Economic Impact Assessment
Guideline
Table A.1 Key issues mentioned in the DSDMIP Guideline
DSDMIP Guidelines Addressed Reference
Define the Project Yes 3.2
Define the base case
Methodology Yes 2
Use best current data available Yes 2
Use standard and consistent terms and
methodologies
Yes 2
Cover the full life-cycle of the project Yes 2
Specify the modelling methodologies Yes 2
Adopt an appropriate discount rate Yes 0
Document all key assumptions and their rationale Yes 0
Explain the methods used to gather information Yes 2
Describe how key impacted stakeholders and communities were consulted
No n.a.
Express monetary values in Australia dollars adjusted to a common date
Yes 2
Use risk management framework to focus on the impacts with the highest probability and consequential impacts
No n.a.
Consider cumulative impacts of other developments in the region, where feasible
No n.a.
Cost Benefit Analysis
Identifying economic outcomes Yes 0
Capital and operational expenditure Yes 4.3.1
Project revenues Yes 4.3.2
Direct impacts on Gross Regional Product Yes n.a.
Any relevant royalties, taxes and duties Yes 4.3.2.1.4
Any relevant site remediation costs Yes 4.3.1
Sources of goods and services Yes 5.2, 5.3
Workforce and labour market impacts Yes 5.2
Identify environmental outcomes Yes 4.3.1
Aboriginal cultural heritage Yes 4.3.1.6
Air quality Yes 4.3.1.6
Ambient noise Yes 4.3.1.6
Biodiversity Yes 4.3.1.6
Flooding Yes 4.3.1.6
64
DSDMIP Guidelines Addressed Reference
Greenhouse gas Yes 4.3.1.6
Groundwater/surface water No n.a.
Non-Aboriginal heritage Yes 4.3.1.6
Traffic Yes 4.3.1.6
Visual amenity Yes 4.3.1.6
Identify social outcomes Yes 5
Workforce and labour market impacts Yes 5.1, 5.2
Direct and indirect full-time-equivalent job numbers during construction and operation
Yes 5.2
Recreational impacts Yes 5.4
Tourism impacts Yes 5.4
Apply a monetary value to identified outcomes or provide qualitative analysis
Yes 4.3.1
Discount all the impacts back to a common time period
Yes 4.4
Sum the present values of the benefits and costs to estimate net benefits or costs
Yes 4.4
Sensitivity analysis Yes 4.5
Regional impact analysis Yes 5
Identify key stakeholders and (local, region, state, national) communities of interest
Yes 5
Local business and industry content opportunities Yes 5
Source locations of employees and contractors Yes 5
Level of stimulus to the regional and state economy
Yes 5
Level and location of employment change through:
Yes 5
Direct labour inputs Yes 5
Indirect labour inputs Yes 5
The projected effects on the local economy (includ8ng housing, labour costs and services)
Yes 5
Demands for other essential services and facilities
Yes 5
Expected timing and geographic distribution of impacts
Yes 5
Any relevant positive and negative externalities No n.a.
65
Queensland Treasury (2015). “Project Assessment Framework –
Cost Benefit Analysis Guideline”
Table A.2 Key issues mentioned in Queensland Treasury Guideline (2015)
Queensland Treasury Guidelines Addressed Reference
Identify the outcome sought Yes 3
Develop the project and policy options
Status quo Yes 3.1
Other options Yes 3.2
Undertake a preliminary evaluation of the options 4.2
Evaluate project options in detail 4.3.1, 4.3.2
Cost benefit analysis Yes
Determine key assumptions Yes 4.3.1, 4.3.2
Identify and estimate the expected economic benefits and costs of the project
Yes
Quantify impacts that can be valued as costs and benefits
Yes 4.3.1, 4.3.2
Identify the unquantifiable environmental costs and benefits
and the result of any cost effectiveness analysis undertaken
Yes 4.3.1.6
Address findings of any
Environmental Impact Assessment undertaken
Yes 4.3.1
Identification of the distribution
of the environmental benefits and costs
Yes 5
Address assumptions made regarding the inclusion or
exclusion of certain costs and benefits
Yes 4.3.1, 4.3.2
Calculate the net present economic value Yes 4.4
Assess risks and sensitivities Yes 4.5
Select preferred option
Cost benefit analysis conclusion, recommendations and checklist
No n.a.
66
Appendix B: CGE
modelling
The Deloitte Access Economics – Regional General Equilibrium Model (DAE-
RGEM) is a large scale, dynamic, multi-region, multi-commodity computable
general equilibrium model of the world economy. The model allows policy
analysis in a single, robust, integrated economic framework. This model
projects changes in macroeconomic aggregates such as GDP, employment,
export volumes, investment and private consumption. At the sectoral level,
detailed results such as output, exports, imports and employment are also
produced.
The model is based upon a set of key underlying relationships between the
various components of the model, each which represent a different group of
agents in the economy. These relationships are solved simultaneously, and
so there is no logical start or end point for describing how the model
actually works.
Figure B.1 shows the key components of the model for an individual region.
The components include a representative household, producers, investors
and international (or linkages with the other regions in the model, including
other Australian States and foreign regions). Below is a description of each
component of the model and key linkages between components. Additional
technical detail is also provided.
Figure B.1 Key components of DAE-RGEM
67
DAE-RGEM is based on a substantial body of accepted microeconomic
theory. Key assumptions underpinning the model are:
The model contains a ‘regional consumer’ that receives all income from
factor payments (labour, capital, land and natural resources), taxes and
net foreign income from borrowing (lending).
Income is allocated across household consumption, government
consumption and savings so as to maximise a Cobb-Douglas (C-D)
utility function.
Household consumption for composite goods is determined by
minimising expenditure via a CDE (Constant Differences of Elasticities)
expenditure function. For most regions, households can source
consumption goods only from domestic and imported sources. In the
Australian regions, households can also source goods from interstate. In
all cases, the choice of commodities by source is determined by a
CRESH (Constant Ratios of Elasticities Substitution, Homothetic) utility
function.
Government consumption for composite goods, and goods from
different sources (domestic, imported and interstate), is determined by
maximising utility via a C-D utility function.
All savings generated in each region are used to purchase bonds whose
price movements reflect movements in the price of creating capital.
Producers supply goods by combining aggregate intermediate inputs
and primary factors in fixed proportions (the Leontief assumption).
Composite intermediate inputs are also combined in fixed proportions,
whereas individual primary factors are combined using a CES production
function.
Producers are cost minimisers, and in doing so, choose between
domestic, imported and interstate intermediate inputs via a CRESH
production function.
The model contains a more detailed treatment of the electricity sector
that is based on the ‘technology bundle’ approach for general
equilibrium modelling developed by ABARE (1996).
The supply of labour is positively influenced by movements in the real
wage rate governed by an elasticity of supply.
Investment takes place in a global market and allows for different
regions to have different rates of return that reflect different risk
profiles and policy impediments to investment. A global investor ranks
countries as investment destinations based on two factors: global
investment and rates of return in a given region compared with global
rates of return. Once the aggregate investment has been determined for
Australia, aggregate investment in each Australian sub-region is
determined by an Australian investor based on: Australian investment
and rates of return in a given sub-region compared with the national
rate of return.
Once aggregate investment is determined in each region, the regional
investor constructs capital goods by combining composite investment
goods in fixed proportions, and minimises costs by choosing between
domestic, imported and interstate sources for these goods via a CRESH
production function.
Prices are determined via market-clearing conditions that require
sectoral output (supply) to equal the amount sold (demand) to final
users (households and government), intermediate users (firms and
investors), foreigners (international exports), and other Australian
regions (interstate exports).
For internationally-traded goods (imports and exports), the Armington
assumption is applied whereby the same goods produced in different
68
countries are treated as imperfect substitutes. But, in relative terms,
imported goods from different regions are treated as closer substitutes
than domestically-produced goods and imported composites. Goods
traded interstate within the Australian regions are assumed to be closer
substitutes again.
The model accounts for greenhouse gas emissions from fossil fuel
combustion. Taxes can be applied to emissions, which are converted to
good-specific sales taxes that impact on demand. Emission quotas can
be set by region and these can be traded, at a value equal to the carbon
tax avoided, where a region’s emissions fall below or exceed their
quota.
B.1. The representative household
Each region in the model has a so-called representative household that
receives and spends all income. The representative household allocates
income across three different expenditure areas: private household
consumption; government consumption; and savings.
Going clockwise around Figure B.1, the representative household interacts
with producers in two ways. First, in allocating expenditure across
household and government consumption, this sustains demand for
production. Second, the representative household owns and receives all
income from factor payments (labour, capital, land and natural resources)
as well as net taxes. Factors of production are used by producers as inputs
into production along with intermediate inputs. The level of production, as
well as supply of factors, determines the amount of income generated in
each region.
The representative household’s relationship with investors is through the
supply of investable funds – savings. The relationship between the
representative household and the international sector is twofold. First,
importers compete with domestic producers in consumption markets.
Second, other regions in the model can lend (borrow) money from each
other.
Some detail:
The representative household allocates income across three different
expenditure areas – private household consumption; government
consumption; and savings – to maximise a Cobb-Douglas utility
function.
Private household consumption on composite goods is determined by
minimising a CDE (Constant Differences of Elasticities) expenditure
function. Private household consumption on composite goods from
different sources is determined by a CRESH (Constant Ratios of
Elasticities Substitution, Homothetic) utility function.
Government consumption on composite goods, and composite goods
from different sources, is determined by maximising a Cobb-Douglas
utility function.
All savings generated in each region are used to purchase bonds whose
price movements reflect movements in the price of generating capital.
B.2. Producers
Apart from selling goods and services to households and government,
producers sell products to each other (intermediate usage) and to investors.
Intermediate usage is where one producer supplies inputs to another’s
production. For example, coal producers supply inputs to the electricity
sector.
69
Capital is an input into production. Investors react to the conditions facing
producers in a region to determine the amount of investment. Generally,
increases in production are accompanied by increased investment. In
addition, the production of machinery, construction of buildings and the like
that forms the basis of a region’s capital stock, is undertaken by producers.
In other words, investment demand adds to household and government
expenditure from the representative household, to determine the demand
for goods and services in a region.
Producers interact with international markets in two main ways. First, they
compete with producers in overseas regions for export markets, as well as
in their own region. Second, they use inputs from overseas in their
production.
Some detail:
Sectoral output equals the amount demanded by consumers
(households and government) and intermediate users (firms and
investors) as well as exports.
Intermediate inputs are assumed to be combined in fixed proportions at
the composite level. As mentioned above, the exception to this is the
electricity sector that is able to substitute different technologies (brown
coal, black coal, oil, gas, hydropower and other renewables) using the
‘technology bundle’ approach developed by ABARE (1996).
To minimise costs, producers substitute between domestic and imported
intermediate inputs is governed by the Armington assumption as well as
between primary factors of production (through a CES aggregator).
Substitution between skilled and unskilled labour is also allowed (again
via a CES function).
The supply of labour is positively influenced by movements in the wage
rate governed by an elasticity of supply (is assumed to be 0.2). This
implies that changes influencing the demand for labour, positively or
negatively, will impact both the level of employment and the wage rate.
This is a typical labour market specification for a dynamic model such as
DAE-RGEM. There are other labour market ‘settings’ that can be used.
First, the labour market could take on long-run characteristics with
aggregate employment being fixed and any changes to labour demand
changes being absorbed through movements in the wage rate. Second,
the labour market could take on short-run characteristics with fixed
wages and flexible employment levels.
B.3. Investors
Investment takes place in a global market and allows for different regions
to have different rates of return that reflect different risk profiles and policy
impediments to investment. The global investor ranks countries as
investment destination based on two factors: current economic growth and
rates of return in a given region compared with global rates of return.
Some detail:
Once aggregate investment is determined in each region, the regional
investor constructs capital goods by combining composite investment
goods in fixed proportions, and minimises costs by choosing between
domestic, imported and interstate sources for these goods via a CRESH
production function.
70
B.4. International
Each of the components outlined above operate, simultaneously, in each
region of the model. That is, for any simulation the model forecasts changes
to trade and investment flows within, and between, regions subject to
optimising behaviour by producers, consumers and investors. Of course,
this implies some global conditions must be met such as global exports and
global imports are the same and that global debt repayments equals global
debt receipts each year.
71
Appendix C:
Calculation notes
There was a calculation error in the estimation of flooding risk as presented
in the report: “Economic Assessment of the Ensham Residual Void Project”.
The flooding risk figures were an overestimation of Options 1 and 2.
Flooding risk figures for Option 3, however, did not require amendment.
The original and the revised figures are presented in Table C.1 below.
Table C.1 Amended flooding risk figures
Original Revised
Option 1 Reduction of
irrigated pasture
land
1,185 hectares 43 hectares
Reduction of
irrigated cotton land
790 hectares 29 hectares
Benefit from
reduction in flooding
risk in perpetuity
$7.02 million $0.25 million
Option 2
(Submitted
option)
Reduction of
irrigated pasture
land
1,185 hectares 70 hectares
Reduction of
irrigated cotton land
790 hectares 46 hectares
Benefit from
reduction in flooding
risk in perpetuity
$11.27 million $0.87 million
Having factored in the change in these figures, Option 2 remains the option
that delivers the highest net benefit both overall and to the Queensland
community. Similarly, Option 1 maintains the position of delivering the
second highest net benefit both overall and to the Queensland community,
ahead of Option 3.
72
Limitation of our work
General use restriction
This report is prepared solely for the internal use of Ensham Resources Pty
Ltd. This report is not intended to and should not be used or relied upon by
anyone else and we accept no duty of care to any other person or entity.
The report has been prepared for the purpose of that set out in our
contract. You should not refer to or use our name or the advice for any
other purpose
73
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