Coal industry

« If Société Générale was genuine about its own social and environmental principles, there’s no way they would remain involved in the Alpha Coal project »

Alpha Coal: it is the name of a megaproject in Queensland, Australia. Alpha Coal would involve extracting millions of tonnes of coal, transporting them by rail over hundreds of kilometers and then exporting them to Asia through a new giant terminal at Abbot Point - in the middle of the Great Barrier Marine Park. Société Générale, one of France’s largest banks, is among the last backers of this project within the international financial community. Julien Vincent and Tony Brown, as representatives of the local and national opposition to the Alpha Coal project in Australia, came to France in May, 2014. Together with Friends of the Earth France, they met Société Générale executives and participated in various protests against the bank. In this interview, they talk about the environmental impacts of the Alpha Coal project, the very good reasons to question its economic viability, and the key role of Société Générale.

Why are you here today in France, and why target Société Générale?

Julien Vincent: I’m the lead campaigner at Market Forces, which is an Australian group whose objective is to prevent financing of environmentally destructive projects. We target banks, pensions funds, and also the direction and use of public finance in Australia. It is in this context that we target international banks, when they provide support to destructive projects in Australia – as is the case here with Société Générale, which plays a key role in the Alpha Coal project [1]. There are other French firms, such as Total and GDF Suez – which owns the dirtiest coal station in Australia – that are also active in environmentally destructive projects in the country [2].

Tony Brown: I work in the tourism industry, 60 kilometres away from the sea dump site that is proposed as part of the project. We account for about 40% of visitors to the Great Barrier Reef, and we have great concerns about the extension of Abbot Point, the coal terminal.

What exactly is SocGen’s role in this particular project?

Julien Vincent: They are counselling the proponent of the project, a company named GVK. If GVK wants to secure the necessary finance for the Alpha Coal project, they need to convince potential investors that it is a bankable project and that it is a suitable project in terms of its environmental, social, political impact. SocGen’s role is to help them achieve that. Furthermore, if you look at other similar projects, you find that often the bank which advises the proponent often ends up supporting the project in an ongoing way. If you’re shopping a project to the finance world, it makes sense that you would be putting your own money into it as well. So we want to make sure that SocGen treats its mandate absolutely seriously. This would involve doing a substantial amount of independent expertise work on top of the official assessment process, which is a shambles in Australia.

Yesterday, you had a long meeting with executives from their sustainable development department. How did it go?

Julien Vincent: It only helps to have a confrontation where you are able to actually lay down the implications of the project on the table. It is a rare opportunity to open up that dialogue.

Tony Brown: What I can provide them as a real business person affected by the project is a voice from the ground, a better notion of the project and what it will actually mean. There is a lot of information that they are only hearing from the proponents’ perspective, or from the perspective of those in government who are closely aligned with the proponents – so this is going to be all the same information. There are actually other governmental sources of information, which SocGen will not have seen – for instance an internal risk assessment by the Great Barrier Marine Park Authority. Its states that the option to sea dump will create a ‘medium to high risk’ to the environment, and a ‘high’ risk to stakeholders – the tourism and fishing industries. If SocGen is going to be genuine about its social and environmental investment principles, at the end of the day, there’s no way they could be involved in the Abbot Point expansion at all.

So the problem is that they only do a ‘desktop job’ when they assess the suitability of the project?

Tony Brown: Every such assessment is a desktop job. That’s precisely the point. If we didn’t come here, if I didn’t get to see these people and they didn’t get to see me, how could we have any chance of changing the direction of this project? My objective in meeting them was to put more balance in their information, so they can see the full picture. Whether they fulfil their own side of the bargain remains to be seen.

What if SocGen pulled out? Aren’t there ten other banks waiting to take their place?

Julien Vincent: This is what they say. Actually many international banks have announced they would not get involved in projects such as Alpha Coal, which will affect the Great Barrier Reef [3]. Several other bank mandates have lapsed and have not been renewed. So far, Société Générale has chosen to stick to the job. We hope the job they do will be very stringent.

Tony Brown: The reality is that any serious bank who looks at this project would see that it has very high economical, environmental and social risks. And if a bank took the responsibility to say this clearly, the project would never be implemented, which would be the right outcome. But the scary part is that despite the fact that everybody knows that Alpha Coal will be very hard to make financially viable, they are continuing with dredging the port. The whole thing will harm the tourism industry – a sustainable industry, which is here for a lot longer than the coal industry - and other sectors as well.

Julien Vincent : One of the greatest issues with the Alpha Coal project is that if it is implemented, there are about 8 other mines coming just behind. This will have a huge impact not only on the global climate, but also local impacts such as the dewatering of the aquifers, air pollution, more dumping points, more dredging.

Why these huge new coal development projects in Queensland at a time when the demand for coal in Asia is decreasing and this type of project doesn’t seem economically viable any more?

Tony Brown: One of the most extraordinary statements we heard yesterday was that they tried to equate the coal industry with the petroleum industry – saying that the price for petroleum was very low in the 1970s and now has become very high, and that it would be the same for coal. In fact, we are far more dependent on petroleum than we are on coal. They said that pushing more coal into the market will eventually raise its price!

Julien Vincent: This was actually a little bit insulting. We have studied these issues too, we have read the official reports and the expert’s predictions on the fall of demand in China and the ’end of coal’. All of this suggests that the last thing you want to now is to export more coal. And we are talking about coal that, by the time it lands in India, will be priced at 100 US dollars a ton. They argue that developing coal is about fighting energy poverty in India and elsewhere, but who there is going to be able to afford electricity generated with coal that costs 100 dollars a ton? This is almost a kind of self-deceit [4].

But they’re businessmen, aren’t they supposed to know what they are doing?

Julien Vincent: They were very eager to push that point. Who knows what their economic logic is? If I look at it objectively, numerous studies by Citi, Deutsche Bank, etc., are all predicting the same thing: that the market is oversupplied and is in structural decline. Société Générale is trying to claim that the low price for coal is just a cyclical problem; most experts say that this is actually a structural decline.

Who are the players pushing for these developments in Australia?

Tony Brown: Australia is very reliant, as a state, on this kind of mining development. This is the way the country was set up. State and federal governments get GST, royalties, taxes money, which are a huge financial incentive. The federal government was responsible for approving the sea dumping; the state of Queensland was responsible for approving most land activities within the Alpha Coal project. The irony is that the port is also owned by the state. At the end of it, it sounds like government approving a project of which it is actually going to be the main beneficiary. They would argue that the people of Australia will benefit. But let’s be honest: 83% of the profits for multinationals go offshore.

Australia has had a mining boom in recent years that has allowed it to weather the global financial crisis better than other Western countries, but it seems to be over. Government authorities are probably eager to make it last longer.

Julien Vincent: I don’t want to dismiss out of hand what the mining boom did for Australia, but it has also distorted the economy, and hurt export-oriented industries, from manufacturing to tourism. And it’s short-termism. I was very keen to impress that on Société Générale yesterday. If they did any real assessment of the risks of the project as a whole, they need to realise that the mining and coal boom as we have had it in Australia recently has actually caused decline in other economic sectors, because of the high Australian dollar and other factors. It’s very important to consider the broader macroeconomic impact of pushing more coal into the market. And more specifically, it will have a direct impact on tourism, which has a major dollar value attached to it.

Tony Brown: To the Australian economy, mining is 9%, and tourism is about 5%. But tourism money stays in communities, whereas those 9% from mining go offshore into multinationals’ coffers. I really question whether our authorities have actually looked at the economics of the Alpha Coal project. I have met politicians many times on this subject, and they have no real understanding of the issues, they just repeat what they have been told by the project proponents. They focus on little glib lines, GDP figures estimates, and never look into the facts.

Julien Vincent: As an example, the equipment for these new mines will not be made in Australia; it will be made overseas, and yet that is counted in the ’value’ of the project. Projects such as Alpha Coal need support from export credit agencies. If the US Export Import Bank comes in, it means you will get your equipment shipped over from the US. Same for the China Export Import Bank. That’s precisely why these export agencies get involved in the first place.

Aren’t these projects at least create new jobs?

Julien Vincent: Australian politicians like to focus on jobs, just like anywhere else. They like to pretend that coal developments will create jobs, but it’s not long-term. The mining industry has shed thousands of jobs in the past couple of years. And look at the way they treat communities. For instance, BHP Billiton had a coal mine in Queensland, and one day they just decided that since it was not making a profit, they would close it at once. The town had became reliant on it, because the mine had forced itself on that town. Then they just moved away and left communities without any support at all.

Tony Brown: There is also the madness of rents in mining towns. For little shacks in the middle of nowhere, you have to pay more than for beachfront apartments in Sydney. This is incredibly painful to the economy of the townships around the mines. The ‘fly in fly out’ is also very disruptive for communities and families. Because the mining industry does not allow people to live around the mines, the employees have to move to Brisbane, 1000 kilometres away, and fly in, work for about 20 days, then fly back to their families, and so on. And that goes for 100% of the workforce.

What do local people and the Australian public in general think of these projects? There seems to have been a lot of protests against the coal industry recently in Australia.

Tony Brown: According to polls, a large majority of people in Queensland are against sea dumping in the Great Barrier Reserve. Locally, it’s very divisive. In Bowen, which is just North of Abbot Point, people are quite keen, because of the jobs. The tourism industry is very opposed. Most communities along the coast are hurting because of the changes that have occurred because of the mining industry. The farmers’ community is very upset as well, because the Galilee Basin is 400 kilometers away from the sea. They are going to build a railroad to Abbot Point, which will go through their farms. It is an important food bowl for Australia. They are worried about water quality. The coal dust will also be a huge issue for them.

Julien Vincent: For the Australian community, the Great Barrier Reef is not up for negotiation. The Alpha Coal project has been challenged in court. There have been three legal challenges to the sea dumping aspect alone. At national level, there is mobilisation and resistance all around the country. There are blockades of mines, which have lasted for several years. There is for instance a very large gold mine in New South Wales, Moles Creek, which has had a longstanding blockade. The company had received a 1.2 billion dollars credit facility, but now it is struggling with it because it can’t proceed with the project. Every day of delay to that mine is costing hundreds of thousands of dollars to the company on interests alone.

A lot of my work is trying to convince people to use their power as people who have money with banks and other financial institutions. We have had no problem convincing many Australians to withdraw their money from the institutions that finance Alpha Coal and similar projects. Just as many people are trying to live in a more environmentally conscious way in their daily lives, if they know that their bank is funding coal exports, they will want to put their money elsewhere.

Unfortunately for you, SocGen is not active in retail banking in Australia…

Julien Vincent: No, but it could happen here in France too. It’s already started. I have met people these days who have moved out of Société Générale because of their support for Alpha Coal [5].

Interview by Olivier Petitjean. Thanks to Lucie Pinson of Friends of the Earth France for her assistance.

Photo : Stephen Hass CC