Warning on coalfield costs

Press, 12 April 1984, Page 8

Warning on coalfield costs

Wellington reporter The Government is preparing to blame its own officials if things go wrong with the development of the Waikato coalfields, according to the Coalition for Open Government, which said the officials would joint the taxpayers and a number of Waikato communities already at risk. Officials of the Mines Division of the Ministry of Energy were under considerable pressure to quadruple Waikato coal production as a result of commitments made by the Government to supply coal, the coalition

The agreement to supply 920,000 tonnes of coS a year

to New Zealand Steel had been made a month before the 1981 General Election. Since then, the coalition said, there had been a growing public awareness of the problems in mining Waikato coal.

The combined capital cost of the Government’s planned coal-based products was $3OOO million — the New Zealand Steel expansion and two new power stations are its biggest customers.

But the coalition said the most recent estimates showed that the expected capital cost of the Ohinewai coalmine — the main source of coal for the Glenbrook steel mill — had trebled in

the last 12 months. Capital costs at Ohinewai had show a bigger and faster increase than any other “think big” project, the coalition said.

Commitments to expand Waikato coal production had arisen from two decisions — to use more coal in power stations, and to expand Glenbrook.

Difficulties in meeting these projects stemmed from two problems — the unsuitability of Maramarua coal for New Zealand Steel and its resulting preference for Ohinewai coal, and the uneconomic methods of underground mining, it said. The coalition said that Division officials

knew of these difficulties in 1981.

In a report dated February, 1982, the planning engineer for the Huntly district, Mr W. Munden, argued the case for longwall mining in Waikato and said that the new mechanical mines would not be economic if the methods planned were used. The costings in his report were based on the period April-December, 1981.

“It seems likely that Mines Division officials had been aware of underground mining problems well before the approval of New Zealand Steel’s expansion in October, 1981,” the coalition said. V s

Yet the Government had signed a contract for the formation of New Zealand Steel which included a legally binding commitment for 50 years to supply coal. It said that the 1982 Energy Plan had acknowledged that the Ohinewai mines, by then marked for New Zealand Steel, might prove to be uneconomic or environmentally unacceptable. The plan had also reported difficult conditions in underground mines. By December 8, 1982, when the agreement had been formally signed, the Government could no longer plead it was ignorant of the difficulties it faced, the coalition said.