Morrison sprints to Adani approval
The sharemarket makes no moral judgements. Money is its only metric. And on the first trading day after the federal election, the market surged to heights not seen since before the global financial crisis, more than a decade ago.
Investors were clearly pleased with the Coalition’s win, seen as a victory for shareholders and the wealthy over the community at large. The finance sector jumped 5.6 per cent, with the Big Four banks doing particularly well, their shares up by between 6.3 and 9.2 per cent.
Analysts called it a “relief rally”, prompted by the fact Labor’s plans to limit negative gearing and lift capital gains tax would have cut the banks’ earnings. The property sector also bounced back, buoyed by the assumption that speculators might come back into the market for the same reason.
Health insurers did even better, on the understanding that – unlike Labor – a Coalition government would not prevent them from raising premiums for their customers. Medibank Private and NIB were both up, by 11.5 per cent and 15.8 per cent respectively.
Larger, though, than all those gains on the Australian market was that of one company listed on the National Stock Exchange of India – Adani Enterprises. On Sunday, the company saw its share price leap almost 30 per cent.
“The sharemarket is telling us the probability of the [Adani] Carmichael mine going ahead has just increased dramatically,” says Tim Buckley, the director of Energy Finance Studies, Australasia, at the Institute for Energy Economics and Financial Analysis.
It was not only the sharemarket telling us that. So was the behaviour of the federal minister for resources, Matt Canavan. On election night he tweeted, “START ADANI!” Canavan also celebrated the election win wearing a T-shirt bearing the same message.
In the days since, Canavan and his fellow pro-coal travellers in the Coalition have seized the political agenda.
Australia now is accelerating towards the Carmichael mine’s approval and, beyond that, the opening up of further coal projects in huge, previously unexploited reserves of Queensland’s Galilee Basin.
But Buckley says this is not only a consequence of the re-election of the Morrison government.
Last weekend also saw the release of exit polling showing Indian Prime Minister Narendra Modi and his Bharatiya Janata Party (BJP) were on track to repeat their landslide election victory of 2014. At time of writing, projections show Modi’s party will secure four times the number of seats won by the second-placed Congress Party.
It is the interaction of these two phenomena, Buckley says, that is driving events. “The No. 1 paid-up supporter of Modi is Gautam Adani. If – when – the BJP gets back for another five years, [Adani’s] sun will shine very brightly, as the first among industrialists who stand behind Modi.”
Over the past five years under Modi, Adani’s empire has already expanded in diverse areas – from real estate to plastics to frozen food to aerospace to defence to cornering the lentil market.
“Adani is into everything,” says Buckley. But energy is the big one.
“It has become India’s biggest private player in the gas business, the electricity transmission business, as well as the biggest renewable energy business,” he says.
Adani already is India’s largest private producer of thermal power, in substantial part because of the relationship the conglomerate has with the government. It continues to grow rapidly towards a goal of 20,000 megawatts of power-generating capacity by 2020.
“Last month, Modi gave Adani a $US1.5 billion loan from the State Bank of India to fund a coal plant at a place called Godda, in the eastern provinces,” says Buckley. “And he’s been given a $1 billion tax concession, through the establishment of a free-trade zone around the power plant.
“The new project will use imported coal and export power to Bangladesh. Seven million tonnes a year, which they could source from Carmichael.”
According to Buckley, Adani’s already extraordinary access to state capital and his political power will be “through the roof”, assuming Modi wins. In all likelihood, given Adani’s ambitious expansion plans, there will be more coal generation plants to come.
That would be an environmental and climate disaster, particularly for India. According to research published last month in the prestigious journal Proceedings of the National Academy of Sciences of the United States of America, air pollution from the burning of fossil fuels already kills at least 690,000 Indians each year. Science tells us India and Bangladesh are among the countries most threatened by climate change.
But Gautam Adani is a creature of the markets, and the markets make no moral judgements.
“Fossil fuels or renewables,” says Buckley, “it’s all about the money for Adani.”
Only a day before the Australian election, speaking to a voter in Townsville, Scott Morrison pronounced himself “always puzzled when any power source attracts such particular partisan attention”.
“Why do we get into any value judgement about any of these particular sources? Because at the end of the day, they are a practical thing, it’s a power source thing,” he said.
Coal, like petroleum and gas, was “just a power source”.
It came down to cost, said Morrison, and there was no “need to engage in a moral debate about it”.
Former prime minister and Warringah MP Tony Abbott touched on the same theme on Saturday night in his concession speech after losing his seat to the independent Zali Steggall, who campaigned strongly on the need to address climate change.
Abbott noted the Liberal Party had done relatively better in places where climate change was perceived as an “economic question”, and worse where voters saw it as a “moral question”.
There is a solid basis for that interpretation. A detailed analysis by Guardian Australia journalist Nick Evershed showed many of the largest swings towards the Coalition occurred in seats with coalmines. He also found the seats that swung harder to the Coalition were more likely to have higher unemployment, lower income and lower levels of education. And vice versa for those that swung towards Labor.
This was a political contest flagged as “the climate change election”, yet it has yielded a perverse result. Instead of pushing government towards greater action on climate change, it has pushed the other way. The pro-coal voices in the Coalition are more strident, and panicked members of the Labor Party, both federally and in Queensland, are preparing to retreat.
The prospect of Australia implementing credible measures to address climate change – Labor’s targets were for a 45 per cent reduction in greenhouse gas emissions and a 50 per cent renewable share of energy generation by 2030 – seems lost, at least for the next three years.
Of even greater concern is that approval of the Adani mine will open the way for other mine proponents, notably Clive Palmer, whose Waratah Coal has plans for an even bigger mine than Adani’s.
If the huge reserves of the Galilee Basin were fully exploited, according to an estimate by the Climate Council, it would result in the emission of an additional 705 million tonnes of carbon dioxide each year, equivalent to 1.3 times Australia’s current annual emissions. But it also would generate vast revenue.
The political pressures are obvious. After the election, Labor is left with just six of 30 seats in Queensland. Its primary vote in the state has fallen to just 27 per cent, far below its national support at 33 per cent.
When asked by Fran Kelly on RN Breakfast on Tuesday why Queenslanders voted as they did, Matt Canavan, a Queensland Nationals senator, summed it up in one word: “Coal.”
Canavan went on to note there had been huge swings away from Labor in other coal seats, such as the New South Wales electorate of Hunter, where the primary vote for the Labor member, Joel Fitzgibbon, fell 13.9 per cent, and 9.8 per cent after preferences.
But there was no Labor “attack on coal jobs”, no imminent threat from the opposition to existing employment in the mining industry.
A week before the federal election, the Queensland Labor government actually greenlit a new $1 billion mine, which will produce 15 million tonnes a year of high-grade coking coal – that is, the kind of coal used to make steel, rather than the low-grade coal Adani seeks to burn to generate electricity. Premier Annastacia Palaszczuk trumpeted an expected 500 new construction jobs and 1000 operational jobs from the Olive Downs mine.
While Labor was not offering the prospect of new government-underwritten coal power stations, as demanded by Canavan’s Queensland Nationals colleagues, a new coal power station was never on the cards – no matter who won the election. And Canavan knew that. Back in March, when Morrison announced a shortlist of 12 new generation projects, potentially eligible for government support, there was no new coal project on it.
Six proposals involved renewables with pumped hydro storage and five were gas. One related to an upgrade of an existing coal plant in NSW.
The only concession to Canavan, his fellow Nationals and the coal lobby was $10 million to study Queensland’s future power needs, including for a new coal generator in Queensland.
But this will never come to anything, barring an act of financial lunacy, for new coal is simply not cost competitive.
At the same time, renewables are already producing jobs around the country. In Victoria, in the two years since the closure of the dirtiest power station in the developed world, the giant Hazelwood brown coal plant, unemployment in that region has fallen from 8 per cent to 5.7 per cent. As energy transition specialist Simon Holmes à Court recently noted, this was “in no small part due to the efforts of the Latrobe Valley Authority, set up by the state government to help ensure a ‘just transition’ for the workers and local community”, and its various programs to retrain and redeploy people rendered jobless by the corporate decision.
Among federal Labor’s election promises was a similar independent Just Transition Authority, which would support “workers and communities affected by the inevitable closure of ageing coal-fired power stations” across the nation.
Canavan was able to twist the proposal into evidence that the opposition was intent on putting coal industry employees out of work.
But there is an argument to be made that the opening up of the Galilee poses a real threat to the jobs of miners in other parts of Australia, because it would bring more supply into a declining market.
In July last year, The Australia Institute produced a report claiming new, highly automated mines in the Galilee would reduce overall mining employment, particularly in Joel Fitzgibbon’s bailiwick of the Hunter, where 9000 jobs would be lost. The report found NSW would be most affected, because it mostly produces thermal coal, whereas most of Queensland’s existing production is coking coal, used for steel-making, for which there is greater demand.
It was just modelling, of course, from a left-leaning and anti-coal think tank. But big mining players such as Rio Tinto and BHP also forecast a declining coal market. And the laws of supply and demand are eternal.
In March, another Galilee mine proponent, the Chinese-owned MacMines Austasia, quietly withdrew from its proposed $7 billion China Stone development, a move seen by some as an indication that the basin was not commercially viable.
Regardless of reality, though, voters in coal seats turned strongly against Labor. The scare campaign worked, in part because Labor sent mixed messages. Bill Shorten variously indicated he personally did not “like” the Adani project, that it should not receive any government assistance, but that he supported coal jobs, was wary of the sovereign risk of canning the Carmichael mine, and would allow it to proceed if it “stacked up” environmentally and commercially.
In contrast, Labor’s shadow environment minister, Mark Butler, was strongly opposed, saying: “I don’t support Adani, Clive Palmer or anyone else opening up a brand-new thermal coal basin in the Galilee just at the same time the world is moving to renewable energy. It just doesn’t make sense!”
As Greens leader Richard Di Natale noted on ABC Radio this week, Labor suffered by saying different things to different parts of the country, “trying to walk both sides of the fence”.
And since the election debacle, a number of people on Labor’s Right, notably Fitzgibbon, have publicly flayed their own party for its “equivocation”.
The Coalition has its own divisions, too. They exist between the climate deniers and coal boosters of the hard right, and the moderates who would have the government make more show of embracing environmental issues. For example, emphasising its own commitment to renewable energy and expediting initiatives such as Snowy Hydro 2.0 and the so-called “battery of the nation” hydro storage proposal for Tasmania.
As the result in Warringah showed, Liberal MPs in affluent inner-urban seats face a threat from climate-focused competitors, which will no doubt grow as evidence of climate change mounts.
But it is Labor that has the more serious problem, particularly in Queensland, where the swings against the party were the largest. It was also where Rupert Murdoch’s News Corp, which owns most of the state’s newspapers, wasted no time after the federal election redoubling a virulent campaign against the state Labor government. On its front page on Monday, the Sunshine Coast Daily ran the headline “Anna, you’re next”, and a picture of Palaszczuk with the crosshairs of a gun sight superimposed on her head.
Consequently, the Palaszczuk government has become suddenly, acutely sensitive to accusations that it has been stalling on the Adani approval process. On Wednesday, wearing a hard hat and fluoro vest to give her words verisimilitude, Palaszczuk held a media conference at which she demanded her own bureaucrats pull their fingers out.
“The community is sick of it, I’m sick of it, everyone is sick of the delays,” the Queensland premier said.
“Everyone has had more than enough time to resolve these issues and for some reason that has not occurred. That all ends now.”
She publicly ordered the state coordinator-general to take a stronger role across the approval process, and to meet, pronto, with Adani to set out a time line.
The company responded with a belligerent media release, complaining that the state had taken two years to review its final management plans for the mine, and insisting on a short time line for approval.
“Any time frame for a decision on these outstanding management plans” longer than two weeks would be viewed as “nothing more than another delaying tactic by the Queensland Labor government designed to delay thousands of jobs for Queenslanders”.
At time of writing, a meeting had taken place between Adani, the coordinator-general and the Department of Environment and Science, and, according to the company, substantial progress had been made towards a time line. Further details to come, we’ll see how it goes, but the company seemed happy.
Tim Buckley suspects the Queensland government’s capitulation on an expedited review process will not be the end of it. Adani previously sought $1 billion from the federal government’s Northern Australia Infrastructure Facility (NAIF) to build a rail line to transport its coal. The Queensland government blocked it.
Given recent political developments, though, he sees the prospect of government involvement in a rail line now as being back on the cards.
Canavan has long championed it. Back in 2017, he said he would be “happy to see” the NAIF invest in rail as “a nation-building initiative”.
“But what I’d expect to see, with the federal government wanting to open the Galilee Basin, is that the rail line’s open access that other mines can use it…” Canavan said.
“I think the logic suggests Canavan now will push for the Commonwealth to fund common-user rail. It would be dressed up as a measure to prevent Adani having monopoly control of the railway line,” says Buckley.
“Then three or four other billionaires – including Palmer – are happy because they get the taxpayer to fund a railway line.”
Maybe, he suggests, that was Palmer’s endgame in spending more than $60 million during the federal election.
Palmer himself told media this week that the intent of his campaign was to “polarise the electorate” and thereby ensure a Coalition victory. In that he succeeded, and now he would be entitled to think the Coalition owes him.
Time will tell how the debt is repaid.
This article was first published in the print edition of The Saturday Paper on May 25, 2019 as "Morrison sprints to Adani approval". Subscribe here.