Approval and Planning Assessment of Black Coal Mines in NSW and Qld: A Review of Economic Assessment Techniques

This reports on issues surrounding economic assessment and analysis in the approval process for black coal mines in New South Wales and Queensland.  The research was conducted by the Hunter Valley Research Foundation (HVRF).

In the wake of increasing public and media commentary questioning economic assessments conducted for mining applications this project may boost confidence of proponents, government and the wider community in the assessment process.

The research methodology included:

• A review of economic techniques used in black coal mining application in New South Wales and Queensland in the period from 2004 to 2013.
• A review of published literature on economic assessment techniques to identify contentious issues and assumptions relating to economic analysis.
• In-depth telephone interviews with a range of relevant stakeholders, including representatives of government agencies, economic consultants and academics to gain representative views on:

• what are considered to be the issues with economic analysis, and
• how economic impacts of proposed new or expanded mining projects should be assessed in the future.

The report provides a summary of:

• Current legislation and guidelines in New South Wales and Queensland pertaining to applications;
• Brief details on the economic assessment techniques typically used for black coal mining applications; and
• Discussion of the limitations and assumptions of each technique.

The results of the research indicated that:

• In both New South Wales and Queensland, government bodies do not prescribe a particular economic approach;
• In the absence of specific requirements by approval authorities, the economic assessments during the period reviewed exhibited considerable variation in both conduct and reporting of results;
• Both States publish guidelines for the conduct of an Environmental Impact Statement (EIS), which includes the requirement for an economic impact assessment. In New South Wales, guidelines are provided by various government bodies/
• In Queensland, the Department of State Development, Infrastructure and Planning (DSDIP) has published a Generic draft terms of reference for an environmental impact statement;
• In New South Wales, a Cost Benefit Analysis (CBA) is an optional accompaniment to the Development Application (DA) for State significant projects that have passed the Gateway Process, however the form of economic assessment to be used is not specified;
• The choice of appropriate economic modelling technique is dependent on the scale of the proposed project;
• Economic assessment should be only one element of decision making;
• Regardless of the economic modelling techniques chosen, there are three key aspects of economic assessment that can improve confidence in the inputs to the decision-making process:

• transparency in presenting the limitations and underlying assumptions of the economic assessment;
• inclusion of a comprehensive CBA, with proper identification of non-market impacts; and
• sensitivity analysis of key variables, in the form of scenario testing.

• A number of stakeholders highlighted that in undertaking CBA it would be beneficial to gain greater clarity on the range of variables that should be considered in the assessment of the economic, social and environmental impacts of a proposed project, including clear identification of non-market impacts, even when these cannot be quantified.