THE PRESS FRIDAY, MARCH 9, 1984. Coal from Ohinewai

Press, 9 March 1984, Page 16

THE PRESS FRIDAY, MARCH 9, 1984. Coal from Ohinewai

The Government is under contract to supply coal to New Zealand Steel for its expanded Glenbrook mill. The coal was expected to come from an opencast mine at Ohinewai, in the Waikato. The Minister of Energy, Mr Birch, says that preliminary studies have indicated that the coal would cost about |69 a tonne. This compares with an earlier Government estimate of about $35 a tonne. The Coalition for Open Government made an estimate that proved to be far closer to the last figure given by Mr Birch than was the earlier public estimate. It would be a curious way to run the affairs of the country if the Coalition for Open Government had to be consulted before a reasonably precise figure for the cost of mining coal could be obtained. Yet in this instance, it might have been a wise precaution. How much, the coal will cost at the pit head, crushed and screened, will determine the rate of return on the mine proposal. How the accounting is handled will also be important. Will the costs of stripping the overburden, and replacing the overbunien, be included in the costing? What will be the cost to the country of taking farmland out of production, and will this be included in the over-all cost of the coal? The possibilities for adjusting the cost figures will be numerous. Yet to a large extent this is not an argument about the economics of mining the coal that lies under the Waikato, but an argument about whether the expansion of the Glenbrook Steel mill is a sound investment. The decision to expand the Glenbrook mill was taken during the 1981 election campaign. At the time it seemed that the plan, to build the aluminium smelter at Aramoana had been abandoned; the Mobil oil company refused to sign the contract for the synthetic petrol plant; the Government apparently considered that its “think big” plans were threatened. The least attractive of the three large development projects, the expansion of New Zealand Steel, was approved hastily. As part of the deal, the Government agreed to supply coal for the mill.

The steel company does not have to be concerned about where the coal comes from. The Government is obliged to supply the coal at the right time and in the right amounts, the cost, which may well be borne in part by New Zealand taxpayers, must also be considered important. Serious doubts have been expressed about whether Ohinewai can be made to produce coal in sufficient quantities by 1988, when the coal will be required by the mill. If normal planning procedures are followed, including an extensive study of the effect on the countryside, the 1988 deadline seems unlikely to be met. The Government could invoke the powers of the National Development Act and “fast-track” the planning procedures. Even if the Government accepted the inevitable complaints from a section of the public, it might still be unwise to hurry into mining the Waikato on the scale proposed, If the mining is confined to opencast pits, a huge hole will be dug and the underground water level of the area will be altered. This might occur not only near the site of the mine, but for many metres, perhaps even kilometres, around. Such an interference with the water table will have a marked effect on whether land remains suitable for farming. The Government will be expected to be forthcoming about the visual impact of the proposed mine, the alteration to the water supply of the area, the time in which the land could be returned to production, and the costs. It might be cheaper for the Government to consider breaking the contract to New Zealand Steel, paying reasonable damages, and letting the steel company make its own arrangements about coal. But that will not solve the steel company’s problem of where to find an economic supply of coal suitable for use in the enlarged mill. If coal has to be imported, perhaps from Australia, much of the economic benefit of the steel mill will be lost to New Zealand.