Media release

Dodging clean up costs: six tricks coal mining companies play

April 14, 2016


A new report from Environmental Justice Australia’s Climate & Finance Program highlights six ways mining companies avoid paying for the rehabilitation of mine sites.

“The report looks at six ways coal companies operating in Australia currently avoid, minimise or delay their rehabilitation obligations” said David Barnden, Climate & Finance Lawyer at Environmental Justice Australia.

“Coal miners in NSW and Queensland are obliged to clean up mines and arrange bank guarantees in case they go bankrupt. However companies take advantage of loopholes to delay cleaning up. They also provide bank guarantees that do not cover full rehabilitation costs.“

“When coal companies like Peabody go bankrupt taxpayers bear any excess rehabilitation costs. Worse still, communities may have to deal with pollution and other dangers from sites that never get properly rehabilitated.”

The six tricks are:

1. Care and maintenance

This is where a mine is mothballed. It never officially closes and is not rehabilitated. When a company goes bankrupt the taxpayer could be on the hook.

2. Extract until cash reserves run dry

Investment banks recognise running mines at a loss until cash reserves run dry can be the best financial outcome for companies and their directors. Instead of rehabilitating when cash is available, taxpayers risk footing the bill should the company go bankrupt.

3. Don’t rehabilitate

One hole left by Rio Tinto’s Mount Thorley coal mine would cost $2 billion to fill. The NSW government decided ‘it would not be reasonable to impose a condition that requires Rio Tinto to completely or even partially backfill the final void’.

4. Sell to an unknown minnow

Sale prices for coal mines are depressed but selling a mine cheaply means the former owner is no longer liable for rehabilitation costs. For example, the Isaac Plains mine in Queensland once valued at $600 million was sold to Stanmore Coal last year for $1. Rehabilitation costs could be immense.

5. Expand

If an existing mine expands instead of closes, companies put off provisioning for rehabilitation costs in their financial statements. This could avoid bankruptcy for a loss-making mine and create more rehabilitation obligations.

6. Inappropriate discounts

A company can get a range of discounts on the amount of financial assurance. In Queensland, mining companies can receive discounts of up to 30%. Peabody, on the precipice of bankruptcy, is in line to receive $10 million in discounts on account of the company’s ‘financial stability’.

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