NSW Government clarifies the strategic future of coal exploration and mining in New South Wales

On 24 June 2020 the NSW Government released its ‘Strategic Statement on Coal Exploration and Mining in NSW’ (the Statement), which outlines the Government’s policy position on future coal mining and exploration in New South Wales and aims to provide increased certainty to industry and community stakeholders.

The new policy position recognises the ‘finite lifespan’ of coal as a source of energy. The Statement therefore seeks to balance the decline of the thermal coal industry over the longer term (as a result of the transition to lower carbon sources of energy pursuant to the Paris Agreement) and the near-term opportunity for the NSW coal export industry to meet continuing international demand for thermal coal, generate jobs and royalties, and support regional communities.

Key takeaways

• The thermal coal industry is expected to continue as an important industry for New South Wales for the next few decades;
• The Statement provides increased certainty to investors, explorers, miners and other industry stakeholders about the future of coal mining and exploration in New South Wales;
• The NSW Government acknowledges the significant impact on regional communities that will result from the decline of the thermal coal industry over the longer term and has committed to diversifying and supporting these communities through ‘location-specific’ plans;
• The Statement is accompanied by a map which outlines prohibited and potential areas for future exploration and mining;
• The NSW Government has committed to further reducing the environmental impacts of coal mining through rehabilitation planning, mitigating fugitive emissions and water/air quality management; and
• Reform to the NSW planning regime is underway, which includes the recent introduction of a prohibition on export-related environmental approval conditions.

The future of thermal coal in New South Wales

Demand expectations

The Statement notes that, while demand for thermal coal has recently been affected by COVID-19, it is expected to be stable in the medium term due to increased sales to South East Asian countries. The Statement acknowledges that long term demand is uncertain as, although it is expected to decrease as countries transition to alternative energy sources, the rate and timing of the decrease will depend on how quickly countries move to low carbon energy sources and implement widespread electrification.

‘Responsible and measured approach to the long-term transition to new energy sources’

The NSW Government has committed to ‘a responsible and measured approach’ in supporting the coal production business, reducing greenhouse gas (GHG) emissions in the mining and electricity sectors, and managing the decline in demand for coal over the long term.

The Statement asserts that reducing the supply of coal from New South Wales will have little or no impact on global carbon emissions while there is still strong demand in international markets. The Government further states that the transition away from coal fired electricity generation ‘will not happen overnight’ and, therefore, that the coal industry is expected to remain an important industry for New South Wales for the next few decades.

Challenges and opportunities for regional communities

The Statement acknowledges the significant challenges for regional communities which rely on the coal export industry that will arise from the transition away from thermal coal. Currently, the coal industry is the source of 22,000 direct and 89,000 indirect employment roles in New South Wales.

The Statement underscores the importance of supporting and working with these at-risk communities and paving the way for new economic opportunities including the growth of mining for metals such as copper, cobalt and rare earth minerals and the development of Renewable Energy Zones (REZs), which are planned for the Central-West Orana, New England and South West regions.

Planned actions

In managing the low carbon transition and its impact on the coal industry, the NSW Government sets out a ‘four-point action plan’:

1. To improve certainty about where coal mining is prohibited

The NSW Government released a map alongside the Statement which details the areas available and excluded from future coal exploration and mining activities.

The potential areas for future coal exploration are located across the Gunnedah, Ulan, Mudgee & Bylong, Hunter, and Lithgow regions at the Gorman North, Coolah South, Giants Creek, Wollar, Hawkins, Rumker, Ganguddy-Kelgoola and Wollombi sites.

The prohibited areas for future coal exploration are located at the Benelabri, EL7223 Watermark buy-back, EL6505 Caroona buy-back, Rocky Hill and Doyles Creek areas.

The map also highlights areas where new coal exploration will be considered but only adjacent to existing coal titles. In effect, this classification applies to all land within the Sydney, Gunnedah Basin and Gloucester Basin coal regions that is not classified as a potential area for future coal exploration, a prohibited area for future coal exploration, land reserved for national parks, or land the subject of a current company coal exploration or mining title.

2. To support responsible coal production

Consistent with its aim of building trust in coal mining in New South Wales, the NSW Government has implemented reforms to its planning scheme, which include amendments to the Environment Planning and Assessment Act 1979 that prohibit approval environmental conditions relating to exports. These reforms responded to the export conditions imposed by the Independent Planning Commission (IPC) in its approval of the United Wambo Coal Project in the Hunter Valley and also incorporate recommendations from the recent review of the IPC.

To promote certainty for investors, miners and explorers, the Government has committed to consider ‘responsible’ applications to extend the life of existing coal mines and release new areas for coal exploration, albeit a limited number.

3. To reduce the environmental and social impacts of coal mining

The NSW Government plans to undertake a variety of activities to help reduce the environmental and social impacts of coal mining.

These activities include: strengthening mine rehabilitation and closure procedures, supporting improvements to air and water quality management, facilitating the constructive use of land which had formerly been used for coal mining, continuing to support communities affected by coal mining, reducing GHG emissions associated with NSW coal mining, and monitoring the secure supply of domestic coal users during the low carbon energy transition.

4. To support the diversification of regional economies which rely on coal in the transition away from thermal coal mining

The NSW Government will roll out ‘location-specific’ plans to economically diversify regional communities which are dependent on coal mining, acknowledging the unique impact that the changes to the thermal coal industry will have in each area.

Implications and next steps

It is encouraging to see the NSW Government taking steps to provide certainty to investors, miners, explorers and community stakeholders as well as committing to a just and balanced transition towards low carbon energy sources in line with the Paris Agreement. This is particularly welcomed in light of the recent uncertainty about the NSW Government’s position on coal mining and exploration as a result of the decisions regarding the Rocky Hill mine, the United Wambo Project and KEPCO’s Bylong Coal Project.

If you have any questions please get in touch with the team at Herbert Smith Freehills.