Exclusive: Carmichael mine set to receive subsidies, favourable deals and tax concessions over 30 years.
Australian governments will give $4.4bn in effective subsidies to Adani’s Carmichael coal project, which would otherwise be “unbankable and unviable”, a new analysis has found.
The report, by the Institute of Energy Economics and Financial Analysis, concluded that the project would benefit from several Australian taxpayer–funded arrangements – including subsidies, favourable deals and tax concessions – over its 30-year project life.
It said the project would be further supported by public handouts, tax breaks and special treatment provided to Adani Power, the proposed end-user of the thermal coal in India.
“If these subsidies were not being provided, Adani’s Carmichael thermal coal mine would be unbankable and unviable,” the report said.
“The subsidies have been provided in an effort to get Adani’s thermal coal mine up and operating for the sake of a handful of jobs and a bag of royalties, payable in a decade or so.”
In a detailed statement, Adani said the institute was “known for publishing alarmist papers that attempt to discredit the fossil fuel industry” and said the report “attempts to resurrect old and patently false and inaccurate claims suggesting the Carmichael project will only be viable because of a variety of government subsidies”.
The report argued that a royalties holiday deal, still under negotiation between the Queenslandgovernment and the Indian conglomerate, “equates to a huge capital subsidy with taxpayers footing the bill”.
The state has been clear that any royalty agreement with Adani would involve the deferred payment of royalties, with interest, and with security in place. Guardian Australia understands those discussions stalled about 18 months ago but have been revived since the federal election, in the Palaszczuk government’s newfound eagerness to finalise all outstanding approvals.
“In total, the royalty holiday would reduce Adani’s capital employed by some $900m by year seven,” the report found. “This is a massive financial subsidy. Given the three-year construction timeline, it would mean zero royalties are likely to be paid by the Adani Group in the coming decade.”
The biggest single subsidy, as calculated by the institute, is a concession given to mining and agricultural companies under the federal fuel tax credit scheme. It calculates that the Carmichael mine would benefit by $2.4bn over 30 years under the scheme.
Adani said this was available to all miners, and the institute “should refer any issues they have on this legislation to the Australian taxation department”.
The company will pay a $18.5m one-off water extraction licence fee for access to floodwater from rivers. IEEFA has calculated the miner’s combined allowance of river water and groundwater at rates paid by Brisbane residents ($45m a year) and at benchmarks cited by coal industry consultants ($19m a year).
In response, Adani said its operational water sources were regulated by the state government, and that “the amount of water to be extracted will be much less than originally modelled” because the initial size of the project had been scaled back to 10m tonnes a year. Modelling and approvals are based on plans to build a mine six times the size.
The potential cost of completely rehabilitating the mine site would be between $1bn and $2bn, depending on the ultimate size of the mine, the institute’s report estimated. Adani has permission to leave six final voids up to 200m deep. The company said it had comprehensive rehabilitation conditions and would undertake works progressively.
Also included are long-known potential subsidies – $100m for the construction of a public road to the mine site and $30m for an airport. Adani has said it no longer requires the airport.
The report also noted the use of corporate tax shield loopholes were common in the mining sector, and that Adani had not paid “any material corporate tax in Australia” despite owning and operating the Abbot Point coal terminal since 2011.
“IEEFA has long argued the Adani Carmichael thermal coal mine proposal is unbankable and unviable without subsidies, entirely at odds with the Paris climate agreement and is strategically challenged even before the first coal is produced.
“For a handful of jobs and only a fraction of the royalties that coking coal provides to the Queensland budget, Adani’s thermal coal mine provides the state with so much less than alternative regional renewable energy investments would do.”
In its response, Adani said the company had not received special treatment.
“We expect anti-coal activists will continue their attempts to discredit and misrepresent our organisation and operations. We will not be intimidated and will deliver our Carmichael project and the benefits it will bring to regional Queensland communities.”
