Who will take on the emissions of Australia’s most polluting coal mine if Gupta sells?

Sanjeev Gupta’s financial woes were undoubtedly the biggest news in Australia’s energy space last week, including the British industrialist’s plan to sell one of the country’s most polluting coal mines in a last minute bid to save the nation’s biggest steelworks.

The mine itself is one of the most storied in Australia’s history. The Bargo mine was initially built in the 70’s by an American company owned by Daniel K. Ludwig, a reclusive Elon Musk of his day. 

In the early 70’s his company, Clutha Development, was hoping to transform not just Tahmoor but the entire region. It had plans to develop a private rail line to transport coal across the Illawarra escarpment and load it onto ships at Coalcliff. The project had initial approval from the NSW Liberal party at the time, but one of Australia’s earliest anti-coal campaigns, run by local Judy Gjedsted, stopped it from ever going ahead. 

Since then, the mine has been bought and sold more than a second hand VW camper van.

It was first taken over by BP in 1980, then Rio Tinto in 1989, Austral Coal in 1997 and Centennial Coal in 2005. Xstrata then took it over two years later, before Swiss-based Glencore bought it in 2013 and passed it onto Gupta’s SIMEC Group in 2018.

Ever since, it’s produced about 2.4 million tonnes of metallurgical coal each year and has consistently been among the top three highest polluting coal mines in the country. It produced close to 1 million tonnes of CO2-e in 2023 (992,938 t/CO2-e), largely in the form of methane gas pouring out of its ventilation shaft.

This gives Tahmoor Colliery the third highest emissions intensity of any mine in the country. It is also eight times greater than the emissions intensity average across the coal sector.

SIMEC Group is now looking to pass on the metallurgical coal mine to its ninth owner for an asking price of $800 million.

The sale was intended partly to raise funds to save Whyalla steelworks – although that was before the extraordinary state government intervention last week to seize control of the steelworks and put it into administration. But Gupta is also looking to sell because his global steelmaking company, GFG alliance, no longer needs coal to make steel.

The company has announced an industry-leading shift to reduce its emissions by 90% by 2030, largely by shifting its steel facilities in Romania, Czechia and South Australia to next generation “green steel” production.

But hopes to be an industry leader have proven challenging over the last few years. The combination of inflated energy prices and interest rates have driven up the costs of production, while steel sale prices fell by 11% last year due to a massive increase in Chinese exports and declines in European demand. 

It’s certainly been a tough time for the steel sector to plan any major capital expenditure.

However, before the mine went to market, SIMEC had applied to modify and extend the existing mine, potentially increasing its annual emissions increase by 57% in the next year alone if granted.

This increase is particularly problematic given the broader challenges the NSW government faces in achieving its 2030 targets, as it currently needs to cut annual emissions by about 8 million tonnes by 2030.

But this raises the question, what will happen to Tahmoor’s emissions?

SIMEC would argue that “the Safeguard Mechanism will be the driving factor for implementing emission reductions at Tahmoor.” But Tahmoor’s current emissions baseline is set at over double its 2023 emissions levels, and even they admit that the Safeguard Mechanism doesn’t actually “require details of how emissions will be reduced”. 

So what about the mine operator? Well, one of the biggest ironies of the extension request is that over the past 5 years, the coal mine’s greenhouse gas emissions have actually declined by 9.85% (CAAGR). 

So they’ve proven they can bring emissions down. But the proposed modification could rapidly reverse this trend.

The Modification proposal would also have a material impact on the future cumulative emissions at Tahmoor Colliery, which could pollute a further 11.5 million tonnes of CO2-e by 2033 from its ventilation shaft if the Modification is granted without clear requirements for a highly efficient onsite mitigation system.

Under the recently released guide for “Large Emitters”, groups like SIMEC are meant to set out an emissions reduction plan that aligns with the NSW targets, but so far their proposal is simply to ramp up emissions, with the possibility to study mitigation options once it’s all approved.  

In their Modification application, SIMEC noted that there could be an opportunity going forward to reduce “at least a 79%” of the mine’s fugitive methane emissions.

If they were to take this on, and install a highly efficient VAM mitigation system, we estimate that this could reduce between 9 and 11 million tonnes of CO2-e over the next decade if done to best practice efficiency standards.

This wouldn’t require closing the mine right now, but it would require state-led regulatory pressure.

It would also clearly need a new owner ready to take on not just a financial asset for its shareholders, but a social responsibility to all of us in NSW, with an equal share in our collective atmosphere and 2030 targets.

Sure, it wouldn’t be cheap to begin with. A full-scale VAM abatement system hasn’t been installed in NSW since 2007, so this will come with a significant first mover premium.

But the commercial viability of this type of investment would be totally different if the NSW government stepped in, and set clear regulatory incentives and requirements that brought coal mines in line with every other economic sector, pulling their weight to meet our state emissions targets. Then the costs would drop, as more projects came online.

That’s why Tahmoor is a real opportunity. The NSW Net Zero Commission set out the challenge ahead to 2030, and Tahmoor represents not just a one-mine opportunity, but one that could trickle down across the industry.

Tahmoor’s sale doesn’t just represent another handover in a history of new owners – it also represents up to 11 million tonnes of greenhouse gas emissions (CO2-e) up for grabs right now.

The question now is, who is going to step in and take responsibility for these emissions. It’s not just one of our most critical abatement challenges, but one of the state’s best untapped opportunities to tackle climate change head on.