Styx Coal Project: Submission
The Styx Coal Project, also known as the Central Queensland Coal Project, is not financially or economically viable and should not be granted any form of project approval. Geoscience Australia has described the project area as “not of economic importance”. Figures presented in the environmental impact statement Appendix 10a – Economic Technical Report suggest the project will lose $441 million.
This estimate is in many ways optimistic. It includes no financing costs, no cost overruns and assumes that production starts immediately, taking advantage of higher initial coal prices. The project is not viable without government subsidy. It will not produce economic benefit for the proponents or the Queensland community unless major royalty holidays and subsidies are provided, subsidies that would come with a major opportunity cost for other Queenslanders.
Much data and analysis in the economic technical report is flawed. Royalty calculations are erroneous and overstate the value of project royalties by $175 million. Production of coal shows a huge peak in year 10, unusual in itself, while operating costs peak in year 12. These issues are not explained.
The economic impact analysis is based on input output modelling, a flawed modelling technique described by the Australian Bureau of Statistics as “biased” and by the Productivity Commission as “abused”. The same consultants used this methodology in another Queensland coal project, the Kevin’s Corner proposal. That study claimed Kevin’s Corner would be producing coal by 2014 and by 2017 would increase state output by $1.4 billion and generate 5,267 direct and indirect jobs. None of this has eventuated and Kevin’s Corner remains a hopelessly stranded asset.
The Styx proposal is less about developing a mine and more about increasing the asset value of the project for the proponent. This is commonplace not only in Australian mining projects but in major projects generally around the world. Economic literature highlights the bias and frequency of over-optimism and strategic misrepresentation in project assessment. Decision makers should be conscious of the economic literature on this topic and assessment processes should take it into account.