BHP gives the World Coal Association the cold shoulder, but the company is no climate saint

Bob Burton

BHP has axed its membership of the World Coal Association (WCA) citing a “material difference” it had with the global coal industry lobby group over its climate advocacy.

However, BHP has simultaneously decided to continue to belong to other industry groups that also advocate the construction of new coal power plants and oppose strong action on climate policy.

The biggest sin of the WCA, in BHP’s eyes, was not that its advocacy on climate was egregiously worse than other lobby groups the company still belongs to, but that it only provides a “narrow range of activities of benefit to BHP from membership.”

Pathway to divorce

The path to BHP’s dumping of the WCA began with the filing of a shareholder resolution by the Australasian Centre for Corporate Responsibility (ACCR) in September 2017. In it, ACCR called on BHP to undertake a detailed review of the inconsistences between the advocacy activities of the mining industry lobby groups it belonged to and its own climate policy.

BHP was effectively wedged between its often lofty rhetoric to shareholders on the need for climate action and the reality of obstructive campaigns waged by the lobby groups it was a member of. In several instances, a senior BHP executive was or is also on the board of directors of a lobby group.

While BHP opposed the ACCR resolution, it bowed to investor pressure and initiated the review.

Just prior to Christmas last year, BHP released its review, in which it proposed cutting ties with the WCA and the US Chamber of Commerce, pending discussion with the groups.

It also put the Minerals Council of Australia (MCA) on notice that it had up to 12 months to align its climate advocacy with BHP’s policy preferences or it too would be dumped.

However, in its review BHP turned a blind eye to the advocacy activities of other lobby groups it belongs to such as the New South Wales Minerals Council and the Queensland Resources Council (QRC). Nor did it even acknowledge that the Cerrejon Coal Company — of which BHP owns a one-third interest — is also a member of the WCA.

The WCA complained that it was “disappointed” with BHP’s review and said it hoped it would be able to continue working with BHP in the future.

Ultimately, the WCA’s pleas for leniency came to naught and BHP announced it was ending its association with the group.

But indirectly, other groups in which BHP is a major player remain involved. The Cerrejon Coal Company, which operates the Cerrejon mine in Colombia, continues to be a full member. The MCA and the QRC are still associate members, as is the Colombian Mining Association, of which the Cerrejon Coal Company is a member.

All is forgiven

While BHP were only too happy to exit the WCA, they were in a far more forgiving mood with the MCA.

While the MCA had been given 12 months to lift their climate policy game, a few tweaks to their energy policy later and BHP decreed they were allowed out of the sin bin. “From a policy perspective, the updated MCA position addresses the two areas identified as material differences by BHP, relating to the energy trilemma and technology neutrality,” BHP stated.

“Technology neutrality” in BHP-speak however does not really mean technology neutrality as most people would understand it.

While the MCA’s policy proclaimed that “no one technology” should be “favoured to the exclusion of others”, the lobby group proclaimed in the next breath that “any policy approach should aim to reduce energy costs in Australia and retain a focus on securing reliable lowest cost dispatchable energy supply that is available 24/7, while meeting emissions reduction targets.” (Bolding in original.)

“Dispatchable” and “24/7”, translated into plain English, means big new coal plants.

Within days of BHP’s April 5 announcement that it was no longer a member of the WCA, the MCA’s Executive Director – Coal, Greg Evens, ventured forth in a letter to the editor in the Australian Financial Review to extol the virtues of building new coal plants without even a hint of carbon capture and storage.

Instead of benchmarking the emissions of a new coal plant against solar, wind or even energy efficiency, Evans proclaimed CO2 emissions would be 20–25 per cent lower against his preferred comparator of “the average of existing power stations.”

If that wasn’t impressive enough, he claimed it could be “up to 40 per cent less” if the comparator selected was “the oldest technology in place.”

In short, to make a new coal plant look less polluting the MCA benchmarked it against old and very dirty plants.

Rubbery figures

Evans went on to claim that a new 1000 megawatt (MW) coal plant would cost nowhere near the A$4 billion other commentators had cited. Instead, Evans pointed to a figure of A$2.2 billion per 1000 MW used in a report commissioned by the MCA and prepared by Solstice Development Services and GHD.

Shortly after the Solstice Development Services and GHD report was released in July 2017 it was savaged by the Australian Financial Review’s Ben Potter. He bluntly wrote that “if you are an investor you won’t want to rely on the Minerals Council of Australia’s costings of new coal-fired power plants.”

Potter noted that GHD had put significant caveats on the plant’s costings, adapted US plant costings to Australia, trimmed the costs by allowing for “Chinese specialised equipment” and added in even further cost savings by using an existing coal plant site to cut infrastructure costs.

With all of these assumptions, the MCA suggested Australia could build one of the world’s cheapest new coal plants, cheaper even than previous estimates by local agencies.

While wind and solar are now significantly cheaper than new coal, the MCA got around this problem by assuming the cost of large amounts of backup would be bundled into the cost of renewables.

In his letter to the editor, Evans also pointed to the 2400 MW Hassyan coal plant currently under construction by ACWA Power and Harbin Electric in Dubai in the United Arab Emirates. It would, he proclaimed, deliver power at an estimated US$42 per megawatt hour (MWh).

However, what Evans didn’t mention was that in March 2017 Abu Dhabi Water and Electricity Company signed a 25-year power purchase agreement with Marubeni and Jinko Solar for an 1170 MW solar farm in the United Arab Emirates. The cost of power from the plant? Just US$24/MWh, which is 43 per cent lower than the Hassyan coal plant Evans highlighted.

Ultimately, the MCA’s coal claims have less to do with the real world costs of coal power and more to do with the desperate need for a new domestic coal plant to point to as a symbol that Australia is still in the coal power game.

Without a new domestic coal plant to point to, the coal exporting members of the MCA will have a hard time arguing that far poorer countries in the Asia-Pacific region should turn their back on cheap domestic solar and wind resources and commit themselves to expensive imported coal.

Not unreasonably, countries pondering their power options would undoubtedly ask, “If new coal is so clean, cheap and fast to build, why isn’t it happening in Australia?”

Which is why BHP was in such a forgiving mood when it came to the climate sins of the MCA and similar groups.

This year BHP plans to produce almost 30 million tonnes of thermal coal from its mines in Australia and Colombia, with the bulk destined for the export market.

With US$2.1 billion in revenue in 2016–17 from just two thermal coal mines, BHP has a lot riding on lobby groups pressing the case for new climate-damaging coal plants. But it far prefers to have third-parties it funds do the dirty work rather than have to wear the damage to its own credibility.

Bob Burton is the Editor of CoalWire, a weekly bulletin on global coal industry developments published by CoalSwarm. (You can sign up for it here.) Bob’s Twitter feed is @BobBurtonoz.