Attachment 1 Ensham responses to DES RFIs, dated 14 June ... · The conversion to present terms is...

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Attachment 1 – Ensham responses to DES RFIs, dated 14 June 2019. (DES reference EPML00732813)

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DES RFI Ensham Response

1. 1a) Further to the information provided in the Stage 4 Economic Impact Assessment Report and the Stage 4 Triple Bottom Line Report, the administering authority requests the provision of the estimated costings of the rehabilitation of both the rehabilitation necessary to re-instate the Nogoa River floodplain and the estimated cost of the option presented in the application. It is requested that both options adequately demonstrate how they satisfy the requirements to be safe, stable, non-polluting and sustain a sustain post mining land use.

As confirmed in our meeting with the Department (dated 4 July 2019), the reference to "re-instate the Nogoa River floodplain" in the Department's RFI is a reference to Option 3 studied in the Residual Void Project. This option comprised backfilling residual mining voids located within the pre-mining floodplain up to the elevation of the original floodplain within the lateral extent of the pre-mining PMF level. Option 1 is as described at section 3.1 of the Stage 3 Environmental Assessment Report. Option 3 is as described in section 3.3 of the Stage 3 Environmental Assessment Report. The Submitted Option is as described at section 5 of the Stage 5 Residual Void Report. The below table taken from the supplementary Economic Impact Assessment Report (refer Table 4.2 on page 30 of the supplementary Economic Impact Assessment Report, October 2019) identifies the Rehabilitation Costs for the three options calculated using Net Present Value terms. The use of Net Present Value terms is consistent with the State Economic Impact Assessment Guideline (2017) which recognises that the value of money changes over time, and as such future costs and benefits should be converted to an equivalent value (the Net Present Value) so that costs and benefits can be compared on equal terms. The conversion to present terms is done by applying a discount rate to future cash flows, a rate which recognises that money in the present is worth more than the same amount in the future due to inflation. An NPV value is not the same as the Estimated Rehabilitation Cost calculator value or the value of rehabilitation previously stated in the current Plan of Operations, both of which represent a cash cost calculation. The above table, completed by Deloitte Access Economics, identifies that the submitted option at -$148.91M is $45.35M less than Option 1 and $184.15M less than Option 3, all expressed in Net Present Value terms. With respect to the request that Ensham adequately demonstrates how the Submitted Option and Option 3 satisfy the requirements to be safe, stable, non-polluting and also a sustainable a post mining land use, Section 6 of the Stage 5 Residual Void Report summarises the impacts on environmental values associated with the submitted option. Ensham’s view, having regard to the outcomes of the independently peer reviewed environmental studies completed in Stage 3, is that the Submitted Option will not cause any serious environmental harm to land, surface waters or any recognised groundwater aquifer and is consistent with condition G15 of the Environmental Authority. The impacts of Option 3 on environmental values are described in Sections 8-11 of the Stage 3 Environmental Assessment Report and at page 19 of this report.

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The approved Terms of Reference for the Residual Void Project require Ensham Mine to use the output of stages 1, 2 and 3 to conduct a detailed Triple Bottom Line assessment (TBLA) to determine the Final Option for submission to the administering authority. On completion, the TBLA must be peer reviewed by an independent suitably qualified third party (i.e. a person whose professional training or experience is relevant to the matters being considered) before submission to the administering authority. The TBLA was conducted pursuant to the Terms of Reference and the independent suitably qualified third party used was the University of Queensland Sustainable Minerals Institute, who commented that the TBLA process was conducted “in accordance with best practice for TBLAs”. Having regard to the output of the TBLA, Option 3 of the Residual Void Project is not the Final Option proposed as a result of the RVP Project studies and is not the submitted option which is to be assessed by DES.

2. 1a) The rehabilitation costings for the option presented in the Economic Assessment and used in the Triple Bottom Line Assessment of $135.9 million is inconsistent and significantly less than the rehabilitation costs presented in the 2017-2019 Plan of Operations which details a costing of $154,092,576 for all overburden and waste dumps rehabilitation outside of the residual voids within the floodplain.

The rehabilitation costing of $154M provided in the previous Plan of Operations (PoOps) is not expressed in Net Present Value Terms, whilst the Economic Impact Assessment (EIA) figures are expressed in Net Present Value terms. Table 4.2 on page 30 of the supplementary Economic Impact Assessment Report (October 2019) compares the rehabilitation costs for the three studied options relative to each other. Comparison of the PoOps rehabilitation ($154M) with the NPV values in the EIA is not a valid comparison as they are not comparable calculations. Refer to item 1a) above for an explanation of why NPV was used in the EIA.

3. 1a) Additionally, the proposed rehabilitation of the proposed self-sustaining vegetation domain details that the inward slopes of spoil will be a maximum of 25% for all spoil with durable rock mulching or other suitable controls. Given that no other suitable erosion controls are available or described, the administering authority requests that the full cost of rock mulch be incorporated into the

Based on discussions with service providers and examples of slope rehabilitation projects of similar materials Ensham believes that there are commercially available financially viable erosion controls, other than rock mulching to a minimum of 1 metre depth, that can be employed for spoils slopes graded between 16% and 25%. Ensham has submitted in the Rehabilitation Management Plan (page 9) that “the inward facing slopes of the low wall spoil at a maximum of 25% would likely include rock mulching or other suitable treatment to further reduce erosion risk potential”. Trials will be conducted to confirm which treatment best suits different slope angles and locations as part of progressive rehabilitation. Ensham confirms that the Estimated Rehabilitation Cost (ERC) that will be lodged with the Administering Authority post decision for the submitted option will include the costs for rock mulching to 1 metre thick for these areas. This is consistent with previous discussions with the Administering Authority and recognises the Administering Authority’s position that rock mulching would be required for these areas if the Administering Authority was

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costing for the option presented in the application. Rock mulch costings should include the placement of at least one metre depth of durable rock material on all areas with slope gradients greater than 15%.

required to undertake the rehabilitation itself. The cost for the addition of 1 metre of rock mulching for the 16 to 25% slopes has been included in the supplementary October 2019 EIA rehabilitation cost.

4. 1a) It is requested that the attached workbook (see attached) is populated both for the costs of rehabilitation to re-instate the Nogoa River floodplain and the presented rehabilitation option. The Department is aware that rehabilitation works at E Pit were completed in 2018-19. The administering authority requests that the actual volumes and costs to Ensham incurred in completing this rehabilitation are provided in the workbook.

The Economic Impact Assessment (March 2019) and the supplementary Economic Impact Assessment of the submitted Option for the Ensham Residual Void Project Report (October 2019), contain sufficient and appropriate detail to enable the Administering Authority to compare the costs (and benefits) associated with the submitted option and the other two options studied under the Residual Void Project. A revised workbook which shows the volumes of material moved by pit for the Submitted Option is provided with this submission, based on the design of the Submitted Option. An equivalent analysis has not been undertaken for Option 3. However, comparable earthworks volumes are set out in section 4.5 of the Landform Design Report. Option 3 earthworks volume totals 241 million cubic metres, whilst the Submitted Option is approximately 103 million cubic metres (as per the Submitted Option workbook provided). The provision of actual costs for the rehabilitation works recently undertaken at E Pit is not within the remit of the Residual Void Project and will not assist the Administering Authority to understand costs for other rehabilitation works as the rehabilitation works required, and, costs incurred for each rehabilitation area differ substantially. Examples of cost differences with E pit include:

• The distance of topsoil from stockpiles to the rehabilitation area • The volume and distance overburden is required to be moved to create the landform • The differences in optimal fleet size and configuration required for handling of both

overburden and topsoil • The final slope angles which inform the volume of overburden to be moved, and • The phasing of works.

In addition to the above, Ensham is unable to provide financial rates incurred for E Pit as these are commercial in confidence.

5. 1b) The administering authority requests the provision of a supplementary economic assessment that incorporates the estimated rehabilitation costings and considers the plausible baseline scenario of the rehabilitation necessary to re-instate the Nogoa River floodplain rather

Ensham advises that the submitted economic Impact Assessment Report (March 2019) and the supplementary Economic Impact Assessment of the Submitted Option for the Ensham Residual Void Project Report (October 2019), both contain the Rehabilitation Costs for all three options studied under the RVP. These costings are represented in Net Present Value (NPV) terms such that the Administering Authority can compare the costs (and benefits) of each option relative to each other. The costs of all three options (Option 1, Option 3 and the Submitted Option), are considered in the Triple Bottom Line assessment, as required by the Terms of Reference for the Residual Void Project. The estimated rehabilitation costings to re-instate the Nogoa River floodplain are not contained in the Stage 5 Submission Report as this Option is not the Final Option submitted to the Administering Authority under the Terms of Reference and the subject of this EA amendment application.

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than the scenario presented in the report.

The Environmental Authority does not specify Option 3 as a relevant Completion Criteria for the residual voids and as such Option 3 is not a baseline scenario for this EA amendment application. Option 3 was studied as required in the Terms of Reference for the Residual Void Project, along with the other options.

6. 1b) The administering authority considers that a baseline scenario that reflects Idemitsu Australia Resource’s commitment to re-instate the floodplain and was the basis of the project’s approval and is therefore the appropriate baseline for this supplementary assessment. This supplementary analysis is requested in order to assist the administering authority to make a decision that takes into account the public benefits or costs of the option proposed.

Ensham does not agree that there is any binding commitment to reinstate the floodplain nor that this was the basis of approval for the 2010 Environment Authority (EA). The Ensham EA does not require reinstatement of the floodplain, rather it requires a study to be undertaken, in accordance with the approved Terms of Reference, to support an application to populate the Completion Criteria for voids. The requirement to undertake this study and finalise the Completion Criteria in the EA is the appropriate mechanism to determine the final rehabilitation design. As such it is not appropriate that reinstating the floodplain is used as a baseline for the submitted application. The approved Terms of Reference for the Residual Void Project require a Triple Bottom Line assessment process for the submitted option, not a comparison of options against a baseline option. The public benefit and costs of the Submitted Option are addressed in the Stage 5 Residual Void Report and the supplementary Economic Impact Assessment (October 2019).

7. 1b) The administering authority requests that this supplementary economic assessment is completed without the assumption of any material uplift in agricultural output but rather considers the actual proposed residual voids in the floodplains containing water that decreases in water quality over time and provides no irrigation benefit.

The economic values provided in Section 6.12 of the Stage 5 Submission Report and Item 9 of this response do not reflect any material uplift in agricultural output associated with a reservoir – the values are based on the post mining land uses submitted. The supplementary Economic Impact Assessment of the Ensham Residual Void Project (October 2019) provided with this submission assesses the Submitted Option and, as requested by the Administering Authority, excludes any material benefits from irrigation.

8. 1c) The administering authority requests the provision of an independent third party analysis of the residual risks and costs of both the rehabilitation activities

The risk assessment submitted in the Stage 3 Risk Assessment Report was informed by the assessment of impacts on environmental values and technical risk analysis conducted by each relevant technical specialist, as summarised in the Stage 3 Environmental Assessment Report. Each of those technical assessments was independently peer reviewed, and corresponding peer review letters included in the submitted documentation provided to the Administering Authority on 27 March 2019. This technical assessment is summarised in section 6 of the Stage 5 Residual Void Report for the Submitted Option.

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required to re-instate the floodplain and the option presented in the application.

The risk assessment methodology used hazard and operability studies (HAZOPs) to identify potential hazards and operational problems that could potentially result from project design. The HAZOPs involved the determination by subject matter experts to identify possible deviations from the expected normal operating conditions inherent in the design that could lead to hazardous situations or future operational difficulties. The preventative control strategies designed to prevent these deviations, together with any recovery or contingency strategies planned to mitigate the consequences of any deviations, were also identified. The risk assessment then involved the systematic scrutiny of the three design options against the three performance criteria of safety, stability and non-polluting. The quality and effectiveness of these strategies was then assessed, resulting in a risk rating. The residual risks were identified using the Risk of Loss Matrix in Appendix 3 of the Risk Assessment Report. This matrix considers the likelihood on the vertical axis and the consequence on the horizontal axis. Definitions for consequences can be found in Appendix 2 of the Risk Assessment Report. Each unwanted event identified in the risk assessment process has a risk ranking – the last column. There were no matters of non-consensus identified in the risk assessment- all participants in the Risk Assessment agreed with the rankings and risk allocations. The risk assessment was conducted in accordance with the Terms of Reference and contemporary risk management standards. The Economic Impact Assessment (March 2019) underwent an independent peer review and the IPR confirmed that all the IPR comments had been satisfactorily addressed. The design of the Submitted Option is consistent with Option 2 except that the post-mine land use is grazing and the water intake infrastructure has been removed. Accordingly, the submitted Option design has been risk assessed and is safe, stable and non-polluting The Submitted Option was presented to the Community Reference Group and considered in the Triple Bottom Line assessment (which was subject to an independent peer review). Ensham is available to explain details presented in the Economic Impact Assessment and/or the Risk Assessment should this be of assistance in assessing this application.

9. It is requested that this independent analysis of the residual risk is considered in the supplementary economic assessment, and provides a quantification of risks both physically and financially with respect to upstream and downstream users, the integrity of the river system and potential effects to the Great Barrier Reef. It is requested that the residual risk analysis

The risks upstream and downstream, the integrity of the river system, and potential effects to downstream environments were assessed in the Stage 3 technical studies. The information from the Stage 3 technical studies was taken into account in the Stage 3 Risk Assessment, included in the Stage 4 Economic Impact Assessment and considered in the Stage 4 Triple Bottom Line Assessment. This has been detailed in Section 6 of the Stage 5 Application Report. The first table below which is a summary of the cost benefit analysis contained in the Stage 4 economic assessment (March 2019) and the supplementary economic assessment (October 2019), both prepared by Deloitte, considers flooding risk both upstream and downstream. The March 2019 Economic Impact Assessment was peer reviewed by an independent expert . The independent peer review letter was provided as part of the submitted information given to the Administering Authority on 27 March 2019. A supplementary Economic Impact Assessment was prepared in October 2019 to exclude any economic value of the sale of water and any agricultural benefits which arose as a result of the sale of that water, and, to include the cost of the landform levee being included as part of the final landform. A peer review of the October 2019 supplementary Economic Impact Assessment was not considered necessary because the methodology remained unchanged, and the subsequent conclusions of this report have not significantly changed against the March 2019 report.

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identify each stakeholder group that is proposed to be responsible for managing the identified risk and which stakeholder groups are exposed to the same risk over time.

As requested by DES the CGE modelling in the October 2019 supplementary Economic Impact Assessment excluded any economic value of the sale of water. In respect of the risk assessment, see above in row 8. As previously noted, the risk assessment presented in the Stage 3 Risk Report was based on the technical assessment of the Options and the technical risk analysis against environmental values, each of which was independently peer reviewed by a third party expert – The peer review reports were provided as part of the submitted information package provided to the Administering Authority on 27 March 2019. Additional technical risk analysis against environmental values was obtained for the Submitted Option including a confirmation of the suitability of incorporating the Option 1 Landform Levee as a final landform for the Submitted Option, a water quality and water balance study for the final Submitted Option landforms (Appendix 5b – Model Run 8) and additional ecological work (Appendix 5e - Onsite Ecology Field Survey Results Report). The upstream and downstream flood impacts of the Submitted Option are addressed in the above and in section 6.4 of the Stage 5 Final Residual Void Report. The Stage 5 Final Residual Void Report identifies that the Submitted Option uses a flood protection landform design to exclude the rehabilitated areas from the floodplain. This landform design is sustainable and protects the rehabilitated landform from flood events up to a 0.1% AEP (1 in 1000 year) event. The risk assessment associated with this landform levee design was assessed as part of the Option 1 landform design and documented in the Risk Assessment report. The second table below identifies the appropriate costs and benefits for the submitted option. It can be seen that the Submitted Option has a higher level of benefit from the reduction in flooding risk when compared to Option 1 and Option 3. The submitted option also has a low greenhouse gas emission cost compared to Option 1 and Option 3. With respect to the request for the provision of costs for both the rehabilitation activities required to re-instate the floodplain, and the option provided in the submitted application, information is contained in Table 4.2 on page 30 of the supplementary Economic Impact Assessment and the second table below.

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These costings are presented in Net Present Value terms so a comparative assessment of the three options can be made. Ensham advises that, until rehabilitation is delivered to the quality that would support relinquishment, Ensham is responsible for managing all risks identified in the risk assessment. An application to surrender any or all of the Mining Lease area would need to be compliant with Chapter 5, Part 10 (Surrender of environmental authorities) of the Environmental Protection Act 1994. The Terms of Reference for the RVP Project did not require assessment against the Great Barrier Reef. The following demonstrates there would be negligible risk to the Great Barrier Reef from the Submitted Option:

a) Water runoff is captured within the final landform (p15 Appendix 5b – Model Run 8); b) As any groundwater daylighting is below the external spill level of the landform, there is no risk to the

downstream environment due release of this water; (p15 Appendix 5b – Model Run 8); c) Flood protection to a 0.1% (1 in 1000 year) flood event would isolate the final landforms from the

floodplain, unless an extreme flood event occurs (e.g. greater than a 0.1% AEP event for this catchment) which is considered low probability based upon historical data;

d) The risk to downstream environment in respect of Option 3 is addressed at p 62 at section 6.3.2.2 of the Stage 5 Residual Void Report.

10. 1c)a. Relevant residual risks include, but are not limited to: a. the likelihood and

consequence of the landform levees and high walls failing

Ensham confirms that the short, medium and long term risks of this hazard have been assessed in the Stage 3 Risk Assessment under each option. The risk was assessed as -3, an unlikely likelihood with a minor consequence. The risk of landform levees failing is the same as for Option 1 (namely flood overtopping, piping failure under the landform, landform erosion) as the landform levee for the Submitted Option is the same design as the Option 1 landform levy. This is addressed on page 49 of the Stage 5 Residual Void Report and page 8 of the Risk Assessment Report which considers that, given the controls identified, the risk of loss is generally low. The risk of the high wall failing is addressed on page 49-50 of the Stage 5 Residual Void Report. The landowner would be responsible for managing the risks to stakeholders.

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11. b. the likelihood and consequences of sinkholes and flood inundation events under the instatement of the Nogoa River floodplain option

These risks were considered in the Stage 3 Risk Assessment. Refer to pages 15 and 16 of the risk assessment report for this information. This risk is also described on p147 of the Stage 3 Environmental Assessment Report.

12. c. the ongoing management, engineering inspection and evaluations required for the landform levees

This was considered in the Stage 3 Risk Assessment. Refer to page 8 of the risk assessment report for this information. For the submitted Option this is the same as described for Option 1 at page 8 because the landform design for Option 1 is the same as the Submitted Option. Maintenance requirements for the landform levees are shown in Table 11-1 on p 55 of the Stage 5 Rehabilitation management Plan.

13. d. predicted climate changes effects over time particularly those of temperature, rainfall and evaporation how they will impact land use, stream flow and equilibrium groundwater levels

There is not expected to be any measurable impact of climate change effects from the submitted option. Climate change impacts on the rehabilitated domains would be the same to that of surrounding land not impacted by mining. The main risk is the failure to establish a self-sustaining vegetated cover. This is considered in the risk assessment with the mechanisms being incorrect vegetation selection, insufficient topsoil, incorrect application and poor land management practices (over grazing). The risk is the same across each option as any climate change impact would act equally on each option. The impact of climate change on water quality and pit water volumes has been assessed in the Stage 3 Water Balance Report. Model Run 2 – Option 1 with Climate Change was undertaken to examine the effect of climate change on water quality and equilibrium water levels in the final landforms. The impacts to streamflow have been separately examined in the Stage 5 report (Appendix 5f – Integrated Quality and Quantity Modelling Report p24).

14. e. the management

of risks related to

potential declines

in water quality

(increases in

salinity and heavy

metal

concentrations) in

residual voids over

time

This was considered in the risk assessment for each option under the Element of Evaporative concentration on salinity within the final landform and leaching potential. Further discussion of the risks for the submitted option has been undertaken in Section 6.3.2.3 Water Quality.

15. f. The extent of backfilling

The submitted option requires 107mbcm of spoil movement to create the landform profile in addition to highwall contouring. Ensham has provided the GIS files showing the complete landform design for the submitted option. The extent of backfilling for the submitted option can be visually interpreted and interrogated using this GIS files. Additional information is available in the Stage 3 Landform Study which was part of the 27 March 2019 submission. The stability of the backfilling associated with this option is as described on page 9 of the Risk Assessment. For Option 3, the risks include piping failure (due to pooling of

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water from rain/flood events ), differential settling in unconsolidated backfill areas leading to erosion and vegetation failure, and loss of fill and vegetation during flood events in areas of unconsolidated backfill.

16. g. Wall treatment type

Ensham advises that the risk assessment has considered the different risks associated with high wall and end wall treatments under each option studied. All highwall and end wall treatments for the submitted option exceed a Factor of Safety of 1.5 as described on page 15 of the Landform Design report and page 57 of the Geotechnical Report. This has been confirmed by the independent expert peer reviewer. The landform stability of the submitted option has been addressed in section 6.2.2.2 in the Stage 5 residual Void Report.

17. h. Annual exceedance

probability for pit

overflow (%)

Ensham advises that the landform in the submitted option is designed to exceed a 0.1% Annual Exceedance Probability (AEP) event. The risks associated with this event are as described at page 8 of the Stage 3 Risk Assessment report and are overtopping of the levee, and levee failure due to piping and erosion. The % AEP for pit overflow is presented on p70 of the Stage 5 Residual Void Report. The flood protection of the final landforms are designed to 0.1% AEP which presents negligible afflux to existing conditions.

18. i. Distance between

nearest

watercourse to toe

of nearest pit wall

Ensham advises that this risk for the submitted option is as described on page 9 of the Stage 3 Risk Assessment.

19. j. Wall and landform levee geochemistry above minimum water level

Ensham advises that this risk is assessed for the submitted option on page 8 of the Stage 3 Risk Assessment report. Geochemistry is discussed on p64 of the Stage 3 Environmental Assessment Report. The Stage 5 Appendix b – Model Run 8 report for the submitted option discusses water quality based on the geochemistry of the material used in the highwall and landform levee and low wall materials.

20. k. Presence of water in voids

The risk of water daylighting in the long term in the final landform has been considered in several ways for the submitted option including assessment of water quality and erosion. Following discussions with the Administering Authority, the Water Body domain will be fenced prior to relinquishment, or once the groundwater daylights (whichever is the sooner) to prevent cattle from accessing groundwater. The submitted Rehabilitation Management Plan identifies that the maintenance of these stock fences will be the responsibility of the land owner, which is currently the applicant. Should title transfer to another land owner, then maintenance of the fencing will become the responsibility of the new land owner. Groundwater is predicted to daylight in the final landform at approximately 50 years post mining. The total area inundated over the 240 years modelled post mining will be 153.9ha or 2.57 % of the total rehabilitated area. This is presented on p83 of the Stage 5 Residual Void Report. As groundwater daylights in this 153.9ha it is anticipated that these areas would be utilised by aquatic bird life, similar to current site dams and pits with water (from groundwater), that support large numbers of aquatic bird life that would not exist on site otherwise. A survey of Ramp 4 Fill Point Dam identified 9 species of water birds. This is presented on p63-64 of the Stage 5 Residual void report.

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21. l. Representative void water quality

Ensham advises that this matter is discussed under the Element of Evaporative concentration, Leaching and Void Water Quality shown on page 10 of the Stage 3 Risk Assessment. The risk ranking for each Element was -1, -5 and -5 respectively using the Risk of Loss Rating Matrix shown in Appendix 3 of the Stage 3 Risk Assessment. Void water quality is presented in section 6.3.2.3 of the Stage 5 Residual Void Report.

22. m. Groundwater levels

This risk was identified and assessed on pages 10 and 11 of the Stage 3 Risk Assessment Report. Groundwater levels in the final landform is presented in section 6.5.4.3 of the Stage 5 Residual Void Report. Groundwater will daylight in approximately 50 years post mining in pits A-E but will not daylight in pits F and Y. The groundwater rest levels are summarised in Table 6.5.4.3 of this report.

23. 1d) Further to the Rehabilitation Management Plan and proposed Rehabilitation Criteria provided in the application, the administering authority requests the following: a. The provision of the

location of gauging station and data used to define the completion criteria for Total suspended solids and sulphate as the proposed criteria are inconsistent with previously provided criteria.

The current water quality completion criteria listed in Ensham’s Environmental Authority (EA) were developed using the accepted methodologies described in the table below.

The revised water quality completion criteria, detailed in the submission and shown in the table below, are based upon available laboratory samples collected from the Duckponds Gauging Station between 1989 and November 2018, and were collected by both the Department of Natural Resources Mines & Energy, and, Ensham Resources. Continuous monitoring and field (hand held) data have been excluded from the data base. The Duckponds Gauging Station is located immediately upstream of Ensham Resource’s mining operations. The revised pH and Sulphate parameters are based on a large dataset as indicated in the table below using the same methodology used to develop the current water quality completion criteria. The Electrical Conductivity (EC) and Total Suspended Solids (TSS) were also reassessed based upon a large dataset. The TSS value has the largest change as the data used also includes both rain and flood events. It should be noted that the current TSS value, as listed in the EA, is an aspirational water quality objective, and is not based on recorded data taken from the Duckponds Gauging Station. It is also of note that only 14 of the 212 samples (6.6%) recorded values of less than 10 mg/L between 1989 and 2018.

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24. 1d) Further to the Rehabilitation Management Plan and proposed Rehabilitation Criteria provided in the application, the administering authority requests the following:

b. justification for the

rehabilitation completion criteria for surface water as the proposed completion criteria for salinity is greater than typical freshwater <1,500µs/cm and stock water guidelines and the completion criteria for metals are greater than the toxicity trigger values, stock water guidelines, human drinking water recreation guidelines and unsupported by the

The HEC (2019b) Void Water Quantity and Quality Balance Modelling Report Run 8 analyses the potential for metals/metalloids to bioaccumulate within the Aquatic Habitat domain. Salinity and trace elements (Arsenic (As), Molybdenum (Mo) and selenium (Se)) were modelled to determine water quality with results confirming that bioaccumulation will occur in the Aquatic Habitat domain, which could form up to 153.9ha (or approximately 2.5% of the total 5,995ha rehabilitated). This bioaccumulation does not represent any serious environmental harm to land, surface water or recognised groundwater aquifer, and meets the obligations contained in the Ensham EA. Specific water aspects are discussed further below. Groundwater: Water in the Water Area domain will not cause any significant environmental harm to any recognised groundwater aquifer. This is due to the design of the rehabilitated landform which does not allow this water to report to the receiving environment - the Water Area domain is a sink for regional groundwater, not a source. Specific results of the modelling can be found in the Void Water Quantity and Quality Balance Modelling Report Run 8 (Appendix 5b of the submitted documents) which supports the Aquatic Habitat PMLU. This report has been Independently Peer Reviewed. Surface water: Water in the Water Area domain will not cause any significant environmental harm to surface water. Downstream river water quality would not be impacted by water in the rehabilitated areas because water in the lowest points of the rehabilitated areas (i.e.: Water Area domain will be at a lower height than river water and as such is unable to flow to surface water courses in the receiving environment). In addition, this water is isolated from the floodplain by the landforms which provide flood immunity exceeding the 0.1% (1 in 1000) AEP flood event. The Geomorphology Report (Page 6) identifies that, for flood water to overtop these landforms, there would need to be a very rare and extreme rain event. Should such a rain event occur, the mixing of the relatively small volume of water in the Water Area domain with the extreme volume of flood water involved would be inconsequential. Water remaining in the rehabilitated areas once the flood has resided would be of the same quality as that in the flood. Water quality: In regards to human consumption and or stock water management, Page 9 of the Rehabilitation Management Plan identifies that the Water Area domain will be fenced off to prevent stock accessing the area. The maintenance of the fences will be included into the residual risk payment for relinquishment. The

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administering authority.

Water Area will not be used for human drinking water and will not report to the environment so that it would impact any drinking water. Signage could be added to the fencing requirement to advise that the water is not fit for human consumption. The Water Area is also not to be used for active recreation.

25. 1d) Further to the Rehabilitation Management Plan and proposed Rehabilitation Criteria provided in the application, the administering authority requests the following: c. Justification for the

design criteria for endwalls and ramps to be any different to those proposed for outward slopes; that is 10% for tertiary and 15% for Permian given these structures are inherently subject to the same dispersion and erosion susceptibility.

Geotechnical analysis (WSP, 2018) conducted as part of the RVP supports that slope angles of up to 25% would be considered geotechnically stable in the long-term. This has been supported by the Independent Peer Reviewer (Douglas Partners). As such, inward facing slopes within the remit of the RVP have been designed with grades up to 25%. It is important to note that this is a maximum slope angle and that there are significant areas that are below this slope angle. Figures 2.6 and 2.7 of the Stage 5 Rehabilitation Management Plan confirm the areas involved in the 16% to 25% slope angles which are the dark green inward facing slopes on the low wall side. With regards to end walls, the materials discussed on page 33 of the submitted Rehabilitation Management Plan are the same materials as the high walls. This material is more competent than low wall material, and as such, would be stable at the completion criteria proposed.

26. 1d) Further to the Rehabilitation Management Plan and proposed Rehabilitation Criteria provided in the application, the administering authority requests the following: d. As Pits A and B

contain a large volume of quaternary-age material, provision of design criteria, rehabilitation treatment and rehabilitation completion criteria

Studies conducted in the RVP, and confirmed by current site experience, support that Quaternary materials can be used in slope rehabilitation up to 10% when blended with Tertiary materials. When covered with topsoil (or other binding medium), this material is suitable for rehabilitating slopes of less than 10%. These areas have been shown to meet land suitability 4 criteria and effectively used for grazing. Areas where this has been done includes the rehabilitated area from A pit south to A pit north. This material (quaternary/tertiary mixture) was topsoiled prior to seeding. Figures 1 and 2 show the rehabilitation in these areas. Figure 1 Two year old rehabilitation on a bench of Quaternary spoil with no topsoil

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for residual voids is requested. Quaternary-age material is highly dispersive and prone to excessive erosion when exposed to rainfall.

Figure 2 Two year old rehabilitation of predominately Quaternary spoil

27. 2 Further to the Stage 3 Hydrology Report and Stage 5 Model Run 8 report, the administering authority requests the provision of a full description and assessment of the impacts on groundwater quality from the rehabilitation necessary to re-instate the Nogoa River floodplain and the presented rehabilitation option.

Pages 79-84 of the Stage 5 Final Residual Void Report, submitted to DES on 27 March 2019, detail groundwater impacts for the assessment. Additional information is available in Section 2.2 and Section 6 of the Groundwater Report prepared by HydroSimulations (Dr Noel Merrick) and Independently Peer Reviewed by DHI Water & Environment (Dr Jason Antenucci). These reports support that there will be no direct or indirect release of contaminants to groundwater aquifers and there will be no actual or potential adverse effect on groundwater aquifers from the submitted option. Based on this, it is reasonable to state that the Submitted Option will not impact the environmental values of groundwater. Groundwater impacts for Option 3, studied as part of the RVP, are detailed in the Stage 3 Groundwater Report. Specifically, Section 2.3 contains the Option 3 description and Section 7 contains Option 3 Assessment.

28. 2a) It is requested that this assessment include: a. appropriate monitoring, management and mitigation measures to ensure that no adverse effects on groundwater occur.

Page 84 of the Stage 5 Final Residual Void Report identifies that "the existing monitoring conditions contained in the Ensham EA will be used to monitor the groundwater impacts (drawdown and quality) up to relinquishment. Consistent with Condition G27 and G28 of the EA, a Post Closure Management Plan (PCMP) will be prepared at least 18 months prior to final coal processing on site and will detail the monitoring requirements for groundwater post relinquishment." Progressive rehabilitation of the mine, detailed in the submitted Rehabilitation Management Plan, will allow the groundwater monitoring requirements to confirm groundwater modelling outcomes prior to relinquishment and inform any further monitoring required. Based on the above, it is appropriate to document post relinquishment groundwater monitoring requirements in the Post Closure Management Plan.

29. 2b) It is requested that this assessment include: b. an assessment of the potential inter-action between the alluvium, Nogoa River and surface water collecting in the pits and consideration of

The Stage 3 Groundwater Report identifies that there is some natural leakage from the Nogoa River to the alluvium which has no effect on River Quality (refer Section 3.3 of Stage 3 Groundwater Report). Water collecting in the rehabilitated land (the Water Area domain) will not cause any significant environmental harm to any groundwater aquifer including the alluvium. The design of the rehabilitated landform does not allow this water to report to the receiving environment that is groundwater will flow into the pit only. Specific results of the modelling can be found in the Void Water Quantity and Quality Balance Modelling Report Run 8 (Appendix 5b). The content of these reports has been Independently Peer Reviewed.

14

Item RFI ref


the potential groundwater impacts to the river system.

30. 2b) It is requested that this assessment include: c. an assessment of the groundwater model prediction that there will be a net outflow from the final landform voids for approximately 35 years from Pits B, C and D; that is act as a source to groundwater. During this period the potential for infiltration from the pits to the receiving environment and potentially to Groundwater Dependent Ecosystems.

P34 of the groundwater report identifies that during the 35 years immediately post underground mining, there would be migration of surface water in pits B, C and D to the underground mine. Water moving to the underground during this time will be of very similar quality to groundwater experienced regionally and as such there is no impact on groundwater aquifers during this period. Void Water Quantity and Quality Balance Modelling Report Run 8 (Figures 10, 14 and 17), supports the view that even if there is a net outflow, bioaccumulation would not be an issue during this 35-year period. In particular the RGS Report (Material characterisation and source term development for the Ensham Coal Mine Final Void Plan, p iii Executive Summary) confirms that the Ensham Coal mine will have low potential for acid generation and the risk of Ensham experiencing elevated concentrations of metals/metalloids in surface and groundwater will be low. Bioaccumulation only commences once groundwater presents in the Water Area domain, and evaporation is able to take effect some 50 years post cessation of mining. At this point in time, this domain is a sink and not a source for groundwater i.e. surface water does not flow back into the groundwater system.

Accordingly, water in the Water Area domain will not impact on GDE's.

31. 2b) It is requested that this assessment include: d. assess the surface water quality within the final landform voids as they will be sodic, saline and have high concentrations of heavy metals (in particular arsenic, molybdenum and selenium) which may impact on the groundwater receiving environment.

The Run 8 Water Balance Report (Appendix 5b) contains this information which describes surface water quality for the submission. This report has undergone Independent Peer Review. See also RFI 30 above.

32. 2b) It is requested that this assessment include: e. assess the effects of external inputs such as during high rainfall or flood events that may affect whether the

of the Model Run 8 Report (Model Limitations) identifies all model limitations specified in the Stage 3 Void Water Quantity and Quality Balance Modelling report (HEC, 2019) also apply to Model Run 8. Section 4.3 of the Stage 3 Void Water Quantity and Quality Balance Modelling Report identifies that "A record of 129 years of rainfall data (1889-2017 inclusive) was obtained for the site from the SILO Data Drill2 for a location near the Ensham Mine. The data set was repeated to simulate 258 years to provide a climate sequence long enough to reach an equilibrium water level in the pit voids.” As such, rainfall events based upon historical rainfall data have been included in the various water balance simulations.

15

Item RFI ref


landform acts as a source or sink.

33. 3 Further to the Stage 3 Hydrology Report, Stage 3 Water Solute and Balance Report and the Stage 3 Environmental Assessment Report, the administering authority requests the provision of an assessment of surface water environmental values. The water quality in the final landform voids will be greater than human drinking water and recreation guideline values for arsenic, molybdenum and selenium. The pooled water in the residual voids is unlikely to be suitable as drinking water for stock or habitat for native fauna. It is requested that a full description and assessment of the impacts of the predicted surface water quality in the residual voids to humans, stock and native fauna is provided. It is requested that this assessment detail and quantify the impacts to surface water quality if the water is released from the voids with the provision of appropriate monitoring, management and mitigation measures that ensure no adverse effects to surface water quality, humans, stock or native fauna occur.

Please refer to responses for RFI 24 above. Analysis of the HEC (2018c) Void Water Quantity and Quality Balance Modelling report indicates that there is potential for metals/metalloids to bioaccumulate within pit waters. They may therefore exceed aquatic guidelines to various aquatic life forms over time when compared to the trigger values contained in the ANZECC (2000) Water Quality Guidelines. Nevertheless, it is anticipated that the water bodies are likely to provide some wading resources for transitory bird species. The Stage 3 Ecological Report identified the risk that due to the gradually increasing salinity and contaminant levels, the diversity of aquatic species within the resultant water bodies could decline over time. However, the Submitted Option would still result in a waterbody suitable for wading/resting for bird species. This is currently observed for existing onsite mine water dams (see photos p64 Stage 5 Residual Void Report). The sensitive area in this locality is the Nogoa river. The final landforms do not adversely impact the river or groundwater and would not impact on the use of the river by native fauna or impact on GDEs. (refer p74 Stage 3 Ecological Assessment report).

Economic Impact Assessment of the Submitted option for the Ensham Residual Void Project

1

Economic Impact Assessment of

the Submitted option for the

Ensham Residual Void Project

Ensham Resources Pty Ltd October 2019

Commercial-in-confidence


Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a

legally separate and independent entity. Please see www.deloitte.com/au/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited

and its member firms.

The entity named herein is a legally separate and independent entity. In providing this document, the author only acts in the named capacity and does not act in any

other capacity. Nothing in this document, nor any related attachments or communications or services, have any capacity to bind any other entity under the ‘Deloitte’

network of member firms (including those operating in Australia).

Liability limited by a scheme approved under Professional Standards Legislation.

© 2019 Deloitte Access Economics

Contents

Glossary i

Executive summary iii

1 Introduction 16

1.1 Report structure 17

2 Methodology 18

2.1 Conditions under the Environmental Authority

(EPML00732813) 18 2.2 Relevant Guidelines 18 2.3 Implication of these guidelines 19

3 The Submitted option for the RVP 21

3.1 Current status quo 21 3.2 The Submitted option 22 3.3 Other options 25

4 Net benefit to Queensland 26

4.1 Scope of the cost benefit analysis 26 4.2 Identifying costs and benefits 26 4.3 Costs and benefits to Queensland 28

4.3.1 Open cut mine rehabilitation impacts 28 4.3.2 Mining operation impacts 34

4.4 Overall cost benefit analysis results 38 4.5 Sensitivity analysis 42

5 Regional impact analysis 45

5.1 Background on the locality and population 45 5.2 Local employment effects 47 5.3 Non-labour expenditure effects 51 5.4 Effects on other local industries 51 5.5 Environmental and social effects 52 5.6 Second round and flow-on effects 53

5.6.1 Analytical methodology and data 53 5.6.2 Economic impacts – GRP 55 5.6.3 Employment impacts 56 5.6.4 Sectoral impacts 57

References 59

Appendix A : Checklist 63



Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a

legally separate and independent entity. Please see www.deloitte.com/au/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited

and its member firms.

The entity named herein is a legally separate and independent entity. In providing this document, the author only acts in the named capacity and does not act in any

other capacity. Nothing in this document, nor any related attachments or communications or services, have any capacity to bind any other entity under the ‘Deloitte’

network of member firms (including those operating in Australia).


© 2019 Deloitte Access Economics

Appendix B : CGE modelling 66

B.1. The representative household 68 B.2. Producers 68 B.3. Investors 69 B.4. International 70

Appendix C : Calculation notes 71

Limitation of our work 72

General use restriction 72

Charts

Chart 4.1 Grassland resulting from the rehabilitation under the

Submitted option ...............................................................................31 Chart 5.1 Impact on gross regional product by the submitted option,

Central Highlands ..............................................................................55 Chart 5.2 Impact on full-time equivalent employment by the

submitted option, Central Highlands .....................................................56 Chart 5.3 NPV of impact on Gross Value Added ($ million) by industry

for the submitted option, Central Highlands ..........................................58

Tables

Table i Summary of findings ................................................................. iv Table ii Overview of the Submitted option and its implications on

existing operations............................................................................. vii Table iii Benefits and costs components for CBA ................................... viii Table iv Overall CBA results ................................................................. x Table v Attribution of CBA results by item .............................................. xi Table vi Net benefit to Queensland community ($ million) ....................... xii

Overview of the submitted RVP option and its implications

on existing operations ........................................................................23 Benefit and cost items considered in this CBA .........................27 Calculation of rehabilitation costs ...........................................30 Calculation of total net producer surplus .................................35 Calculating the share of net producer surplus attributable to

Queensland .......................................................................................35 Overall CBA results ..............................................................39 Attribution of CBA results by item ..........................................40 Net benefit to Queensland community ($ million).....................41 Comparison of central CBA results with alternative discount

rates ................................................................................................42 Sensitivity analysis – comparison of overall CBA result in

absolute terms ..................................................................................43 Sensitivity analysis – comparison of overall CBA result in

percentage deviation terms from central case .......................................43 Sensitivity analysis – comparison of net benefit for

Queensland in absolute terms .............................................................44 Sensitivity analysis – comparison of net benefit for

Queensland in percentage deviation terms from central case...................44 Population characteristics of the Central Highlands SA3 ............46 Estimated rehabilitation local employment effects relative to

mining industry employment in the locality ...........................................49 Estimated mining operation local employment effects

relative to mining industry employment in the locality ............................49 Estimated rehabilitation option local employment effects

relative to average employment in the locality.......................................50

Estimated mining operation local employment effects

relative to average employment in the locality.......................................50 Estimated rehabilitation and mining operation local

operating expenditure effects ..............................................................51 CGE Inputs for the Submitted option ......................................54 Impact on Gross Regional Product by the submitted option

across regions ...................................................................................56 Impact on full-time equivalent employment by the

submitted option across regions ..........................................................57 Table A.1 Key issues mentioned in the DSDMIP Guideline .......................63 Table A.2 Key issues mentioned in Queensland Treasury Guideline

(2015) .............................................................................................65 Table C.1 Amended flooding risk figures ...............................................71

Figures

Figure 3.1 Location mapping of open cut pits in Ensham Mine .................24 Figure 5.1 Central Highlands SA3 average weekly personal income by

industry – 2016 ($2016) .....................................................................46 Figure 5.2 Unemployment (%) by SA2 in the Central Highlands

Statistical Area ..................................................................................47 Figure B.1 Key components of DAE-RGEM .............................................66



i

Glossary

ABS Australian Bureau of Statistics

AUD Australian dollar

CHPP Coal Handling and Preparation Plant

CBA Cost benefit analysis

CGE Computable general equilibrium

CO2-e Carbon dioxide equivalent

CPI Consumer Price Index

DA Development Application

DES Department of Environment and Science

DNRME Department of Natural Resources, Mines and Energy

DSDMIP Queensland Department of State Development, Manufacturing, Infrastructure and Planning

EA Environmental Authority

EIA Environmental Impact Assessment

EL Exploration Lease

EPA Environment Protection Authority

ETL Electricity Transmission Line

FOB Free On Board

FTE Full Time Equivalent

GDP Gross Domestic Product

GRP Gross Regional Product

GSP Gross State Product

ha hectares

km kilometres

kV kilovolt

LEA Local Effects Analysis

LGA Local Government Area

ML Mining Lease

Mtpa million tonnes per annum

NPV Net Present Value

NSW New South Wales

PM Particulate Matter

RFI Request for Information

ROM Run-of-Mine

RVP Residual Void Project

SA3 Statistical Area 3

SEARs Secretary’s Environmental Assessment Requirements

SEE Statement of Environmental Effects



ii

SUA Significant Urban Area

TSP Total Suspended Particulates



iii

Executive summary

Context to the report and summary of results

Ensham Resources Pty Ltd (Ensham) submitted the Residual Void Project

(RVP), required under the approved Project’s Terms of Reference, to the

Department of Environment and Science (DES) on 27 March 2019. The RVP

considered how to best manage the residual voids after the conclusion of

open-cut mining operations at the Ensham Mine. The submission included

an Economic Impact Assessment (EIA) report undertaken in compliance

with the Queensland State Government Economic Impact Assessment

Guideline (2017).

The EIA report addressed the economics of three options as required under

the Project’s Terms of Reference. In particular, the Option 2 EIA information

was prepared on the basis of a water reservoir as the post mining land use

for a number of the rehabilitated mining areas. Water drawn under licence

in large flood events (>17,000ML flow in the river per day) would be stored

in this reservoir and then be available to generate regional agricultural

benefits.

Following receipt of correspondence from the DES and the Department of

Natural Resources, Mines and Energy (DNRME), dated 10 January 2019, the

post mining land use for these rehabilitated mining areas was changed to

primarily grazing. The EIA figures for the revised post mining land use were

recalculated by Deloitte Access Economics and included in the submission

(the Stage 5 Residual Void Report) of 27 March 2019.

On 14 June 2019, Ensham received a Request for Information (RFI) from

DES, which included a request for the preparation of a supplementary EIA

to better document the costs and benefits of the Submitted option, being

the revised version of Option 2. Specifically, DES requested that the

supplementary EIA exclude any irrigation benefits from the reservoir

option. Accordingly, this report has been prepared to address the

requirement for a supplementary EIA as listed in Item (1b) of the

Information Request.

The summary of EIA results on the Submitted option are as follows. All

dollar figures are presented in present value terms using a discount rate of

7%, whereby present value terms are in 2018 dollars.1

The net benefits from the Submitted option presented in this report

remain higher than the other options analysed in the March 2019

report.

The net benefit to Queensland from the operation of the Ensham mine is

around $285 million.

The net benefit to Queensland from the rehabilitation of the open-cut

residual voids to mitigate floods is estimated to be $2.5 million.

The rehabilitation of the open-cut residual voids to mitigate floods also

generates economy-wide impacts as the activity on the Residual Void

Project (RVP) flows through to the economy more broadly. It is

1 This ensures that the figures are in the same year and are comparable to the figures in the previous submission: “Economic Assessment of the Ensham Residual Void Project”.



iv

estimated that Queensland’s Gross State Product (including the Central

Highlands region) increases by $18 million.

The economic impact analysis also projects the state-wide employment

impact in relation to the rehabilitation of the residual voids. This

employment impact includes a combination of direct employment to

rehabilitate the residual voids, as well as any employment from

suppliers and crowding out of any economic activity. It is estimated that

under the Submitted option, there will be an additional 40 FTE

employed annually on average over its life, with about 25 FTE to be

employed in the Central Highlands region.

Table i Summary of findings

Submitted option ($m, NPV)

Monetised benefits ($m NPV2)

Direct benefits of project to Qld

RVP 2.49

Mining Operation 284.94

Total direct benefits 287.44

Economy wide benefits of RVP to Qld GRP

Central Highlands 13.82

Rest of Queensland 3.89

Queensland 17.71

Employment (Annual Average FTE)

Direct benefits of project to Qld

RVP 30

Mining Operation 474

Total direct employment 504

Economy wide benefits of RVP to Qld employment

Central Highlands 25

Rest of Queensland 15

Queensland 40

Source: Deloitte Access Economics.

Note: Queensland is the sum of Central Highlands and rest of Queensland. Figures may not sum

due to rounding and some figures are rounded to assist interpretation.

2 NPV calculated using a 7% real discount rate



v

Introduction

Deloitte Access Economics was commissioned by Ensham Resources Pty Ltd

(Ensham) to undertake an Economic Impact Assessment (EIA) of the

Ensham Residual Void Project (‘the RVP’). The RVP considered how to best

manage the residual voids after the conclusion of open-cut mining

operations at the Ensham Mine. The RVP submission, required under the

approved Terms of Reference, was submitted to the Department of

Environment and Science (DES, formerly the Department of Environment

and Heritage Protection) on 27 March 2019.

In this EIA, three options were identified for assessment in the RVP. The

EIA determined regional and state impacts of each residual void option. The

EIA included a Cost Benefit Analysis (CBA) and a Regional Impact Analysis

(RIA) and satisfied all Queensland Government guidelines and assessment

standards, including the “Economic Impact Assessment Guideline” issued by

the Queensland Department of State Development, Manufacturing,

Infrastructure and Planning (DSDMIP).

This report is prepared as a supplementary EIA and it outlines the

Submitted option for the RVP to the DES. The Submitted option is titled as

Option 2 in the 27 March 2019 submission, but in this report it excludes any

irrigation benefits from the reservoir option. This report has been prepared

for the purpose of assisting Ensham to report on findings from the RVP to

the DES. This report is required under the Environmental Authority

EPML00732813 (EA) issued by the DES as part of Ensham mine operations’

reporting requirements.

In undertaking this analysis, Deloitte Access Economics has used data on

the scope, scale, timing, and technical assessment of environmental

impacts provided by Ensham. Deloitte Access Economics has not reviewed

or assessed the validity of these inputs.

This report is prepared solely for the use of Ensham.

About the RVP

The Ensham Mine, an open cut and underground bord and pillar coal mine

located approximately 35km east of Emerald (in Central Queensland), is

operated by Ensham, a wholly owned subsidiary of Idemitsu Australia

Resources Pty Ltd (Idemitsu), on behalf of the Ensham Mine joint venture

(JV) partners. The JV partners, and holders of the Environmental Authority,

are Bligh Coal Limited3, Idemitsu and Bowen Investment (Australia) Pty Ltd.

Together, Idemitsu has 85% equity in the Ensham Mine partly through its

subsidiary company, Bligh Coal Limited. Idemitsu is wholly owned by

Idemitsu Kosan Global, a Japanese listed company. Bowen Investment is

wholly owned by LG International, a Korean listed company.

EA EPML00732813 (the EA), dated 9 August 2018, is the relevant

environmental authority under which Ensham operates the mine, which

covers the following mining leases.

Open-cut operation: Mining Lease (ML) 7459, ML 7460, ML 70326, ML

70049

Underground operation: ML 70365, ML 70366, ML 70367

3 Idemitsu has 85% equity in Ensham partly through its subsidiary company, Bligh Coal Limited



vi

The EA was amended in March 2017 to include conditions requiring a

scientific and environmental assessment of the options to rehabilitate

residual voids in the flood plain of the Nogoa River and other voids at the

Ensham Mine.

Conditions G16 of the EA states that a RVP must be completed and

submitted to the administering authority, being the Queensland Department

of Environment and Science (DES, formerly the Department of Environment

and Heritage Protection) by 31 March 2019. The terms of the RVP requires

that the residual void following cessation of open-cut mining operations

does not cause any serious environmental harm to land, surface water or

any recognised groundwater aquifer, other than the environmental harm

constituted by the existence of the residual void itself.

The content requirements of the RVP are contained within Condition G20 of

the EA. Note that this condition has been satisfied: the analysis of options is

available in the report: “Economic Assessment of the Ensham Residual Void

Project”.

In accordance with the terms set out in the EA, the RVP has been divided

into five stages. This economic assessment forms part of the technical

assessments that will inform Stage 4. The five stages are:

Stage 1 – Project definition and options identification

Stage 2 – Preferred options technical studies

Stage 3 – Preferred options detail design

Stage 4 – Most preferred option identification

Stage 5 – Regulatory documentation.

Under the terms of existing MLs, Ensham is permitted to mine coal in the

open-cut mine to 2022 and mine coal in the underground mine to 2028.

Ensham is currently seeking an extension of the underground mining lease

beyond 2028 to 2031. Deloitte Access Economics has been advised by

Ensham to assume an extension of the underground mining lease, and that

mining operations will continue until 2031 as the current status quo.



vii

The Submitted option

A summary of the scope of works and associated timing of the Submitted

option is outlined below in Table ii.

Table ii Overview of the Submitted option and its implications on existing

operations

Submitted option (Cattle Grazing)

Open mine rehabilitation (RVP)

Summary of work To utilise landform levees with a final land use outcome of grazing. The redesigned landform will deliver better

post-mining land suitability for cattle grazing than the land pre-mining for the area.

Duration of RVP work 2020 – 2034 (15 years)

Relevant pits ML 7459 (pits A, B, C, D, and potentially E)

Detailed scope of work Bulk of rehabilitation earthwork activity is from

2020 to 2034 Labour is required from 2020 to 2034 to

rehabilitate the residual voids Overburden emplacement areas behind the

existing levee are reshaped in a manner that achieves the minimum stable landform slope requirements

Mine infrastructure is removed in 2034

Pits E, Y and F, which lie outside of PMF, would be

subject to rehabilitation in accordance with the

existing Rehabilitation Management Plan

A biodiversity corridor will be developed adjacent to

the highwall between Corkscrew Creek and the

Nogoa River, which would reduce any visual impacts

that may be associated with the rehabilitated

landforms.

Mining operations

Life of mine Open cut mining operation to 2022 (as with current

ML conditions).

Underground mining operation to 2031 (extension

of existing ML beyond 2028 to 2031).

Extraction of around 64.3 Mt of saleable thermal

coal.

Assessment approach

The CBA estimates the direct and indirect impacts of the Submitted option

on the Queensland community. A range of impacts are considered, including

the financial, social and environmental impacts. Outcomes from this CBA

will be used by Ensham to inform a Triple Bottom Line (TBL) assessment of

the preferred option, as required under Condition G11 of the EA.

Ensham has a statutory obligation under the EA to rehabilitate the open-cut

mine following cessation of mining operations in 2022. As such,

continuation of the current status quo is not a viable option. On this basis,

this CBA does not present a Base Case for determining what would

happen without the RVP.



viii

This CBA includes the benefits and costs associated with operating the

Ensham mine, in particular the underground mine, under the Submitted

option. This is because the Submitted option for the RVP will have a direct

financial impact to Ensham in terms of the option to extend the life of the

underground mine to extract additional coal beyond 2031.

The items considered in this CBA are listed in Table iii. Items are separated

into two broad categories: those benefits and costs that arise directly as a

result of the rehabilitation program; and, those benefits and costs that arise

from operating the Ensham mine to 2031.

These items have been developed in compliance with the Queensland

DSDMIP (2017) Economic Impact Assessment Guideline which attributes

costs and benefits of a project to members of a specified (Queensland)

community. From these components, the share of the net benefits that

accrue to the Queensland community are then aggregated.

Table iii Benefits and costs components for CBA

Item Benefit components Cost components


RVP rehabilitation cost

Bulk earthwork costs Topsoil, amelioration, seeding and ripping costs Infrastructure removal and equipment costs Overhead salaries and site on-costs Other rehabilitation costs

Residual value of land

Value of mine disturbance area rehabilitated into additional grazing land and other land types with biodiversity values

Flooding risks Benefits from decreased upstream and downstream flooding risk

Externalities Greenhouse carbon emissions from

rehabilitation works

Mining operation impacts

Net producer surplus Gross mining revenue

Operating costs Capital costs

Taxes (Australian, state and local) Royalties

Local Government rates

Rates payable to Central Highlands Regional Council

Royalties Royalties payable to Queensland Government

Company income tax Company income tax payable to the Australian Government

CBAs use market prices where available to estimate the costs and benefits

of a proposal. Where markets are imperfect or non-existent, a range of

techniques are employed to infer the costs and benefits of a proposal. This

includes using industry standard values and findings from a literature

review or surveys as proxy values for the costs and benefits we want to



ix

measure. Where appropriate proxy values are difficult to identify or

unavailable, and hence quantification is not possible, these costs and

benefits are described qualitatively to address the potential impacts of a

proposal.

For those impacts that are difficult or non-effective to place a value on, a

supplementary quantitative measure and/or qualitative measure is

provided, as per that recommended by the Queensland Treasury (2015)

Project Assessment Framework Guideline for Cost Benefit Analysis.

Costs and benefits for the Submitted option is estimated using information

provided by Ensham and the findings of previous feasibility studies prepared

on the Ensham Mine.

All costs and benefits are presented in 2018 dollars and discounted to the

start of 2018 at a real discount rate of 7%, in accordance with the

Australian Office of Best Practice Regulation (2016) guidance on CBA and

relevant Queensland guidelines. The period of analysis is from 2018 to

2060.

Net benefit to Queensland

Assessment of the costs and benefits presented in Table iii indicates that

the Submitted option is expected to generate a net benefit to the

Queensland community of $288 million in net present value (NPV), based

on a 7% discount rate. These benefits are comprised of:

Residual value of land of $2.7 million

Reduction in flooding risks of $0.5 million

Royalties payable to the Queensland Government of $259 million

Company income tax payable to Queensland of $25 million

Local government rates payable to the Central Highlands Council of $1.5

million.

Table iv presents the overall results of the CBA, while Table v provides a

breakdown of the items by affiliation to stakeholders.

Considering the sources of benefits to Queensland:

Net benefit was greatest for the Submitted option compared to the set

of rehabilitation options in the “Economic Assessment of the Ensham

Residual Void Project”, March 2019. This is largely driven by the

approach taken to achieve the outcomes of the RVP, with minor

differences on the mining operations. These minor differences are

driven by a difference in the workforce required for rehabilitation,

affecting the taxes that Ensham has to pay.

The net benefit to Queensland is somewhat offset by the greenhouse

gas emissions that will be produced as part of the rehabilitation work.

Under the Submitted option, the cost of greenhouse gas emissions

equates to $0.8 million in present value terms. This is less than both

Options 1 and 3 with an estimated cost of $1.7 million and $2.7 million

in present value terms respectively, which is the result of higher levels

of diesel consumption to fuel earthwork activities.

The residual value of land under the Submitted option is valued at $2.7

million in present value terms. This option is also expected to provide a

reduction in flooding risk from up to and including a 0.1% Annual

Exceedance Probability flood event. The benefit from reduction in

flooding risk is $0.5 million in present value terms.



x

Table iv Overall CBA results


RVP

Benefits

Residual value of land 2.74

Flooding risks 0.54

Costs

Rehabilitation cost -148.91

Cost of GHG emissions -0.78

Net benefit -146.41

Mining operation net benefit

Net producer surplus# 429.62

Royalties 258.61

Local Government rates 1.51

Corporate income tax 124.11

Total 813.85

Total net benefit 667.44

Note: Calculation assumes no net benefit for workers and suppliers. Results are presented based

on benefits and costs to stakeholders, including Idemitsu and its joint venture partners, Queensland community, Queensland Government, and Australia. Figures may not sum due to

rounding and some figures are rounded.

# Net producer surplus excludes royalties, taxes and local government rates.

Source: Deloitte Access Economics calculations.



xi

Table v Attribution of CBA results by item

Idemitsu & JV partners

Queensland Community

Queensland Government

Australian Government

and community

RVP

Benefits

Residual value of land 100%

Flooding risks 100%

Costs

Rehabilitation cost 100%

Cost of GHG emissions

100%

Mining operation

Net producer surplus 100%

Royalties 100%

Local Government

rates

100%

Corporate income tax 20% 80%


Table v is the share of benefits and costs attributable to the Queensland

community based on the ownership structure of the Ensham Mine. Based on

results shown in Table iv and Table v, Table vi presents the overall results

for the Queensland community.



xii

Table vi Net benefit to Queensland community ($ million)


RVP

Benefits


Costs

Rehabilitation cost -

Flooding risks 0.54


Net benefit 2.49


Net producer surplus# -

Royalties 258.61



Total 284.94



on benefits and costs to stakeholders, including Idemitsu and its joint venture partners,

Queensland community, Queensland Government, and Australia. Figures may not sum due to




Queensland benefits from being a recipient of royalties and a share of the

company income tax from the proponents. On the basis that Queensland

accounts for 20% of the Australian population, the share of the company

income tax attributable to Queensland is estimated to be around $25 million

in present value terms.

The benefit to Queensland excludes some benefit and cost items that could

not be quantitatively assessed. As recommended under the Queensland

guidelines, qualitative analysis was undertaken for these items, including

impacts on noise, landform stability, and land farming efficiency.

Effects on regional community

The Regional Impact Analysis (RIA) estimates the economic and social

impacts of the Submitted option to the regional communities located near

the Ensham Mine. The regional economy is defined as the Central Highlands

Statistical Area 3 (SA3) and includes the populations of Central Highlands

and Emerald. The Ensham Mine is located within the Emerald Statistical

Area 2 (SA2).



xiii

The results of the RIA are complementary to the CBA and translate effects

to Queensland into those relevant to the regional communities located near

the Ensham Mine.

Local employment and income effects

For the rehabilitation of the open cut mine, the Submitted option is

expected to directly employ an average of 175 FTE annually between 2018

and 2031 from the locality to operate the mine. The rehabilitation of the

open cut mine is expected to, on average, directly employ 11 FTE annually

between 2020 and 2034 from the locality.

The net local employment effect is estimated as the employment income

that is in addition to average wages in the locality. This includes the net

employment effect from the rehabilitation works and the mining operations.

An additional $7.4 million in employment income is generated for the

locality each year from operating the mine between 2018 and 2031. For the

undertaking of the rehabilitation, the Submitted option generates an

additional $0.5 million of employment income in the locality per year,

between 2020 and 2034.

Other local industry effects

Beyond employment, the Submitted option will generate additional

expenditure on other non-labour inputs such as fuel, equipment, utilities

and professional services, a share of which will directly contribute to the

local economy.

Of the mine’s non-labour expenditure, 17% is estimated to be spent within

the locality, based on the local expenditure data provided by Ensham

(2019). Specifically, the average annual expenditure on non-labour inputs is

estimated to be $2.4 million for the Submitted option.

Assuming this local supplier share is maintained, it is estimated that

approximately the following will be spent in the locality for rehabilitating the

open-cut mine and maintaining the mine operations:

$55.3 million per year between 2018 and 2019;

$57.7 million per year between 2020 and 2031; and

$2.4 million per year between 2032 and 2034.

The rehabilitation is not likely to materially impact other local industries,

such as agriculture, tourism or business travel, given that the Ensham Mine

is likely to repurpose the existing workforce for the continued operation and

the rehabilitation of the mine.

Considering that the employment effects of the Submitted option are small

relative to the labour force in the locality, there are not anticipated to be

any short run adjustments in the cost of living for local residents.

Environmental and social impacts on the local community

It is assumed all environmental and social impacts evaluated in this CBA

will accrue to the locality. These include impacts on flooding risk, residual

value of land and greenhouse gas emissions.

The residual value of land is the most notable local benefit, amounting to

$2.7 million in present value terms. The other benefit is the reduced

flooding risks, which accrues entirely to the locality. Economic value created

from the reduction in flood impacts are estimated at $0.5 million in present

value terms.



xiv

Greenhouse gas emission costs are also assumed to accrue entirely to the

locality.4 The total cost of the greenhouse gas emission to the locality is

estimated to be $0.8 million for the Submitted option in present value

terms. This is equivalent to an estimated average annual cost to the locality

of $108,000 over the rehabilitation period.

Second round and flow-on effects

Methodology

We have used a Computable General Equilibrium (CGE) model to estimate

the flow-on effects of the capital investment, operational expenses required

to rehabilitate the residual voids under the Submitted option for Central

Highlands and the broader Queensland economy over time.

The CGE modelling has been undertaken using the same inputs and

assumptions that underpin the CBA analysis. This ensures consistency in

the methodology used to assess the broader economic impact of the

Submitted option. As such, results from the CGE modelling are impacted by

the same data limitations experienced in the CBA analysis.

Economic output impacts

Under the Submitted option, rehabilitation is estimated to lead to an

additional of $12.9 million in present value terms over the period 2018 to

2034, under a 7% discount rate for the Central Highlands economy, at an

average of $1.6 million per year.

More broadly, the modelling indicates that Queensland’s gross state product

(GSP) would increase by $16.6 million, in present value terms, over the

period 2018-2034, under a 7% discount rate, reflecting a small degree of

positive spill over impacts in the rest of Queensland.

Employment impacts

It is estimated that the Submitted option will create an additional 25 FTE

jobs on average per year over the period 2020 to 2034 in the Central

Highlands regional economy. The increased employment impacts are driven

by the amount of expenditure required for construction of the final

landforms over time. Aside from this result, the modelling indicates that

there are some positive impacts to the rest of the Queensland economy

under the Submitted option.

Sectoral impacts

Under the Submitted option, the capital expenditure directly supports

activity in the construction industry, which is reflected in the increased

gross value added (GVA) of $22 million in present value terms.5 This, in

turn, creates additional demand in industries that supply construction with

intermediate inputs, such as heavy manufactures and financial, business

and government services.

Some industries, however, experience crowding out overall. That is, the

capital expenditure leads to reduced activity in some parts of the economy

as it draws productive resources away from them (either directly, or

through increased demand for inputs from other industries). For example,

coal mining industry will experience the highest decrease in economic

4 In other studies, population share is used as a proxy for attributing externality impacts to local communities such as Central Highlands and NSW. 5 Industry gross value added (GVA) measures the value of an industry’s production. It is used to measure the contribution of individual industries to the gross product of a state or territory.



xv

activity by $9 million, in present value terms, over the construction period.

This decreased economic activity can be explained by the increased activity

in the construction industries, which are drawing away resources from other

industries.

Although there are decreases in GVA in some industries, the additional

activity due to the increased domestic expenditure has a net positive impact

in the Central Highlands for the Submitted option.

Deloitte Access Economics

16

1 Introduction

Deloitte Access Economics was commissioned by Ensham Resources Pty Ltd

(Ensham) to undertake an Economic Impact Assessment (EIA) of the

Ensham Residual Void Project (‘the RVP’). The RVP considered how to best

manage the residual voids after the conclusion of open-cut mining

operations at the Ensham Mine. The RVP submission, required under the

approved Terms of Reference, was submitted to the Department of

Environment and Science (DES, formerly the Department of Environment

and Heritage Protection) on 27 March 2019. This submission included an

EIA report undertaken in compliance with the Queensland State

Government Economic Impact Assessment Guideline (2017).

A long-list of options for the RVP had been investigated and filtered to

identify a short-list of three options for detailed assessment:6

Option 1: Landform levee

Option 2: Flood mitigation and beneficial use

Option 3: Backfill to pre-mining Probable Maximum Flood (PMF) level.

For these three options, an EIA was used to determine the regional and

state impacts of each residual void option, as required under the Project’s

Terms of Reference. The EIA included a Cost Benefit Analysis (CBA) and a

Regional Impact Analysis (RIA), thus satisfying all relevant Queensland

Government guidelines and assessment standards, including the “Economic

Impact Assessment Guideline” by the Queensland Department of State

Development, Manufacturing, Infrastructure and Planning (DSDMIP).

In accordance with the Queensland Government Guideline for economic

impact assessment, the report, “Economic Assessment of the Ensham

Residual Void Project”, undertook an assessment of the net economic

benefits of the options to the Queensland community, within a cost benefit

analysis (CBA) framework. The CBA was complemented by a Regional

Impact Analysis (RIA) that considered the direct economic and social

impacts of the options to the regional community close to the Ensham Mine

(being the Central Highlands Statistical Area 3), as recommended in the

Economic Impact Assessment Guideline. The report considered other

factors, including the financial, social and environmental impacts

associated with each option. Outcomes from this analysis was used by

Ensham to inform a Triple Bottom Line (TBL) assessment of each option, as

that required under Condition G11 of the EA EPML00732813 (the EA).

In particular, the Option 2 EIA information was prepared on the basis of a

water reservoir as the post mining land use for a number of the

rehabilitated mining areas. Water drawn under licence in large flood events

(>17,000ML flow in the river per day) would be stored in this reservoir and

then be available to generate regional agricultural benefits. Following

receipt of correspondence from the DES and the Department of Natural

Resources, Mines and Energy (DNRME) dated 10 January 2019 the post

mining land use for these rehabilitated mining areas was changed to

primarily grazing. The EIA figures for the revised post mining land use were

6 In compliance with Condition G20 of the Environmental Authority

https://secure-web.cisco.com/1UF5dgwULyW-z62UqnYV6qr4Y2h2L_Mvv9WLPzlpVfBcWTgo2LeU88SBUASxFtGrSuRIRAW6j91tN-DzTZ50BDCWAA2k5QOytJGmBC9nRYy3XxUukxpSyouH-VeNNzs3rlneu1ZK0QGOp0DhTVvk7LmZcazIWf8JLRKTzUZf9SI-Q4_sK1aok__rKY6buh1uyfTDddW0CK0OkdeWA5Ictpgdn31Pe1jo_F5ugaR_HGKtSKvSkW5sLBt-_1f_Nw4uyAjGV2ccOntNmbpzZJH8LPiogZ3MUoUbSnlmrDUsbmgO7wNSyvrqb5HmOekh5PSwj/https%3A%2F%2Fwww.dnrme.qld.gov.au%2Fhome

https://secure-web.cisco.com/1UF5dgwULyW-z62UqnYV6qr4Y2h2L_Mvv9WLPzlpVfBcWTgo2LeU88SBUASxFtGrSuRIRAW6j91tN-DzTZ50BDCWAA2k5QOytJGmBC9nRYy3XxUukxpSyouH-VeNNzs3rlneu1ZK0QGOp0DhTVvk7LmZcazIWf8JLRKTzUZf9SI-Q4_sK1aok__rKY6buh1uyfTDddW0CK0OkdeWA5Ictpgdn31Pe1jo_F5ugaR_HGKtSKvSkW5sLBt-_1f_Nw4uyAjGV2ccOntNmbpzZJH8LPiogZ3MUoUbSnlmrDUsbmgO7wNSyvrqb5HmOekh5PSwj/https%3A%2F%2Fwww.dnrme.qld.gov.au%2Fhome

17

recalculated by Deloitte Access Economics and included in the submission

(Stage 5 Residual Void Report) of 27 March 2019.

On 14 June 2019, Ensham received a Request for Information (RFI) from

DES, which included a request for the preparation of a supplementary EIA

to better document the costs and benefits of the Submitted option, being

the revised version of Option 2. Specifically, DES requested that the

supplementary EIA exclude any irrigation benefits from the reservoir

option. Accordingly, this report has been prepared to address the

requirement for a supplementary EIA as listed in Item (1b) of the Request

for Information (RFI) with revisions being made to the CBA for Option 2.

The revised Option 2 is referred to as the ‘Submitted option’ throughout this

report, as per the RFI from DES dated 14 June 2019. Based on the analysis

in this report, the net benefits from the Submitted option remains higher

than the other options studied in the March 2019 submission.

1.1 Report structure

The chapters of this report are structured in accordance with the

Queensland Government Guidelines for economic impact assessment and

cost benefit analysis.

The structure of this report is as follows:

Chapter 2 outlines the methodology employed in this report including

how the approach used aligns to the Queensland CBA guidelines.

Chapter 3 details the Submitted option for the RVP.

Chapter 4 presents the results of the CBA, identifying the net benefits

of the Submitted option for the Queensland community.

Chapter 5 presents the results of a RIA, including the likely economic

and social effects of the Submitted option on the regional economy

surrounding the Ensham Mine.

Appendix A provides a checklist illustrating how this report has met

the requirements of various guidelines.

Appendix B presents an overview of the CGE model.

Appendix C is a note on revised calculations related to flooding risks.

18

2 Methodology

Deloitte Access Economics has established a methodology for undertaking

this economic impact assessment (EIA) of the RVP for meeting the

requirements in the EA, specifically Conditions G16 and G20. This EIA

includes both a CBA and a RIA. This chapter reviews relevant guidelines

before discussing how these have been applied in this report.

2.1 Conditions under the Environmental Authority

(EPML00732813)

The Ensham Mine operates under EA EPML00732813. The Environmental

Authority (EA) EPML00732813 was amended in March 2017 to include

conditions requiring a scientific and environmental assessment of the

Submitted option to rehabilitate residual voids, post cession of open-cut

mining operation, in the flood plain of the Nogoa River and other voids at

the Ensham Mine.

Conditions G16 of the EA states that a RVP must be completed and

submitted to the administering authority, being the Queensland

Department of Environment and Science (DES, formerly the Department of

Environment and Heritage Protection) by 31 March 2019. The terms of the

RVP requires that the residual void following cessation of open-cut mining

operations does not cause any serious environmental harm to land, surface

water or any recognised groundwater aquifer, other than the

environmental harm constituted by the existence of the residual void itself.

The content requirements of the RVP are contained within Condition G20 of

the EA. Note that this condition has been satisfied: the analysis of options

is available in the report: “Economic Assessment of the Ensham Residual

Void Project”.

A number of the topics covered in the EA are beyond the scope of an

economic impact assessment; however; there are particular areas that are

potentially relevant to the methodology adopted in this report. These

include impacts on land resources, water resources, biodiversity,

surrounding landholders, communities, transport, air quality, noise, and

greenhouse gases. These impacts have been considered, where relevant,

as part of this economic assessment.

2.2 Relevant Guidelines

The following guidelines have been used in preparing this report:

Queensland Treasury (2015) “Project Assessment Framework guideline

– cost benefit analysis”; and

Queensland DSDMIP (2017) “Economic Impact Assessment Guideline”.

The DSDMIP guideline provides a specific framework for cost benefit

analysis and regional impact analysis prepared as part of an economic

impact analysis for large resource projects declared as coordinated

projects, while the Queensland Treasury guideline provides a high-level

framework specific for the development of a cost benefit analysis that

meets Queensland Government standards. These guidelines state the

processes and types of information and analysis needed by the Queensland

Government to inform its assessment process.

19

A full account of the requirements of these guidelines is given in Appendix

A and the relevant requirements are cross-referenced against sections of

the report.

2.3 Implication of these guidelines

Together, these guidelines set out the key requirements for this economic

impact assessment. While Appendix A contains an item by item

reconciliation of how these guidelines have been addressed or considered,

it is first worth considering their implications qualitatively.

Overall, they require the economic impact assessment be carried out using

a set of standard approaches and with consideration of certain topics. The

guidelines specify two components for the economic impact assessment as

part of an environmental impact statement: a CBA to assess the public

interest by estimating the net present value of the residual void

rehabilitation to the Queensland community, and a RIA to assess the likely

impacts of the rehabilitation to the locality.

Following the guidelines for CBA, the analysis involves:

establishing a status quo against which to assess the economic and

other impacts of changes due to the RVP;

defining the scope of the Submitted option to the RVP including the

inputs required to achieve the RVP objectives;

quantifying changes resulting from the Submitted option relative to the

current status quo with respect to both benefits and costs, including:

– economic resource cost such as capital expenditure and operating

costs;

– impact on existing landholders;

– economic benefit such as income to workers and suppliers;

– economic, environmental and social impact on regional community;

– potential economic benefits such as royalties and corporate income

tax from additional coal output in underground operations; and

– externalities including environmental and social impacts;

estimating the monetary value of these changes using market prices,

where available, otherwise using imputed prices or a qualitative

assessment;

consolidation of values by applying an appropriate discount rate to

estimate the net present value of the Submitted option’s future net

benefits;

estimating the net present value of net benefits of the Submitted

option;

undertaking a sensitivity analysis on the key variables in considering

uncertainties related to specific benefits and costs;

assessing the distribution of benefits and costs across different groups

and geographic levels; and

reporting of results, including unquantified impacts, so as to include all

material that may be relevant to the decision maker.

The Submitted rehabilitation option is described in Chapter 3. Chapter 4

then covers the identification, quantification, consolidation and reporting of

the incremental costs and benefits relating to the Submitted option. In

particular, the CBA has been prepared with respect to the net benefits

attributable to Queensland, which is the community of interest specified in

the Queensland DSDMIP (2017) and Queensland Treasury Guideline (2015)

20

guidelines. This means that the benefits and costs estimated in the CBA are

those that accrue to the Queensland community only.

As suggested in the guidelines, the results from the CBA contain much of

the information required for the RIA analysis. The RIA translates the effects

estimated at the state-wide level into the impacts on the communities

located near the Ensham Mine.

The assessment of the consequences of the Submitted option on the local

and regional economies, in accordance with the Queensland DSDMIP

(2017) guidelines are presented in Chapter 5.

Following the guidelines for RIA, our analysis involves:

defining the spatial area and population groups to be included and

analysed;

quantitatively and qualitatively analysing the local effects relating to:

– local employment, such as workers employed under the Submitted

option who are ordinarily resident in the locality, as well as the

expenditure of additional labour earnings by both local and non-

local workers in the local economy;

– non-labour expenditure, such as purchases made in the locality

relating to the construction and operations activity attributable to

the Submitted option;

– other local industries, such as the impact of the Submitted option

on agriculture or tourism in the local area, and potential temporary

impacts on food and housing markets for local residents; and

– the long-term and temporary positive and negative externalities

that the Submitted option could create in the locality, including

environmental and social impacts;

an analysis of flow-on effects, including indirect impacts resulting from

the Submitted option due to adjustments in the economy such as price

movements or changes in labour demand and supply.

The RIA draws on material presented in the CBA – for example, the CBA

already requires that externalities relating to the Submitted option are

identified and quantified. The RIA includes the portion of these externality

benefits or costs that are incurred within the local and regional economies.

Qualitative impacts in the CBA are also discussed qualitatively in the RIA

where they are incurred in the local area.

The following section sets out our approach for ensuring that all the

relevant requirements of the EA and relevant guidelines are covered within

the CBA and RIA presented in this report.

21

3 The Submitted

option for the RVP

The CBA methodology described above provides a structured approach to

assessing the Submitted option. Using the same methodology in the

“Economic Assessment of the Ensham Residual Void Project”, it was

determined that the Submitted option is likely to result in the highest net

benefit overall and to the Queensland community. This was found to be the

case, regardless of whether the water reservoir was available to be used

for irrigation purposes. Note that the figures reported in present value

terms are in 2018 dollars. This is to ensure that the figures are in the same

year and are comparable to the figures reported in the previous

submission: “Economic Assessment of the Ensham Residual Void Project”.

Ensham has a statutory obligation under the EA, to rehabilitate the open-

cut mine following cessation of mining operations in 2022. As such,

continuation of the current status quo is not a viable option. On this basis,

this CBA does not present a Base Case for determining the state of the

world without the RVP. The Submitted option represents a distinct state of

the world project.

This chapter defines both the current status quo and the Submitted option.

3.1 Current status quo

The Ensham Mine is an open cut and underground bord and pillar coal mine

located approximately 35km east of Emerald (in Central Queensland). It is

operated by Ensham Resources Pty Ltd (Ensham), a wholly owned

subsidiary of Idemitsu Australia Resources Pty Ltd (Idemitsu), on behalf of

the Ensham Mine joint venture (JV) partners. The JV partners, and holders

of the Environmental Authority, are Bligh Coal Limited7, Idemitsu and

Bowen Investment (Australia) Pty Ltd. Together, Idemitsu has 85% equity

in the Ensham Mine partly through its subsidiary company, Bligh Coal

Limited. Idemitsu is wholly owned by Idemitsu Kosan Global, a Japanese

listed company. Bowen Investment is wholly owned by LG International, a

Korean listed company.

The EA, dated 9 August 2018, is the relevant environmental authority

under which Ensham operates the mine and covers the following mining

leases.

Open-cut operation: ML 7459, ML 7460, ML 70326, ML 70049

Underground operation: ML 70365, ML 70366, ML 70367

The EA was amended in March 2017 to include conditions requiring a

scientific and environmental assessment of the Submitted option to

rehabilitate residual voids in the flood plain of the Nogoa River and other

voids at the Ensham Mine.


22

Condition G16 of the EA states that a RVP must be completed and

submitted to the administering authority for review and comment by 31

March 2019.

The purpose of the RVP is to ensure that the residual void following

cessation of open-cut mining operations does not cause any serious

environmental harm to land, surface water or any recognised groundwater

aquifer, other than the environmental harm constituted by the existence of

the residual void itself. The minimum content requirements of the RVP are

contained within Condition G20 of the EA.

In accordance with the terms set out in the EA, the RVP has been divided

into five stages. This economic assessment forms part of the technical

assessments that will inform Stage 4. The five stages are:

Stage 1 – Project definition and options identification

Stage 2 – Preferred options technical studies

Stage 3 – Preferred options detail design

Stage 4 – Most preferred option identification

Stage 5 – Regulatory documentation.

Under the terms of existing MLs, Ensham is permitted to mine coal in the

open-cut mine to 2022 and mine coal in the underground mine to 2028.

Ensham is currently seeking an extension of the underground mining lease

beyond 2028 to 2031. Deloitte Access Economics has been advised by

Ensham to assume an extension of the underground mining lease, and that

mining operations will continue until 2031 as the current status quo.

3.2 The Submitted option

This supplementary EIA documents the costs and benefits of the Submitted

option, which excludes any irrigation benefits from the reservoir. The CBA

therefore excludes any activities relating to the set up and operation of

water infrastructure, as well as the subsequent benefits from irrigation.

A summary of the scope of works and associated timing of the submitted

rehabilitation option is provided below in Table 3.1. A map of the relevant

residual voids (also referred to as ‘open cut pits’) to rehabilitate, as part of

the RVP, is presented in Figure 3.1.

23

Overview of the submitted RVP option and its implications on existing

operations

The Submitted option (Cattle grazing)


Summary of work To utilise landform levees with a final land use outcome of grazing. The redesigned landform will

deliver better post-mining land suitability for cattle grazing than the land pre-mining for the area.

Duration of RVP work 2020 – 2034 (15 years)

Relevant pits ML 7459 (pits A, B, C, D, and potentially E)

Detailed scope of work Bulk of rehabilitation earthwork activity is from

2020 to 2034 Labour is required from 2020 to 2034 to

rehabilitate the residual voids Overburden emplacement areas behind the

existing levee are reshaped in a manner that achieves the minimum stable landform slope requirements

Mine infrastructure is removed in 2034

Pits E, Y and F, which lie outside of PMF, would

be subject to rehabilitation in accordance with

the existing Rehabilitation Management Plan

A biodiversity corridor will be developed

adjacent to the highwall between Corkscrew

Creek and the Nogoa River, which would reduce

any visual impacts that may be associated with

the rehabilitated landforms.

Mining operations

Life of mine Open cut mining operation to 2022 (as with

current ML conditions).

Underground mining operation to 2031

(extension of existing ML beyond 2028 to

2031).

Extraction of around 64.3 Mt of saleable thermal

coal.


24

Figure 3.1 Location mapping of open cut pits in Ensham Mine

Source: Ensham. (2017) Residual Void Project Briefing Note 4 – Stage 3 Preferred Options

Descriptions and Rationales.

25

3.3 Other options

As outlined in the Queensland Treasury (2015) guideline, a CBA typically

requires the assessment to report on all feasible project options. This report

only evaluates the Submitted option for the RVP, as put forward by the

Proponent.

In the “Economic Assessment of the Ensham Residual Void Project” report,

Deloitte Access Economics evaluated three options.

landform levee - augmenting the design of existing flood levees to

develop permanent landforms along the existing levee alignment to

provide flood immunity for the 0.1% Annual Exceedance Probability

flood event having had consideration of the risk of a PMF level event.

flood mitigation and beneficial use - utilising post-mining voids to form

water storages to capture a proportion of high flow flood water and

store this water for potential beneficial reuse.

backfill to PMF - backfilling residual mining voids located within the pre-

mining flood plain up to the elevation of the original flood plain within

the lateral extent of the pre-mining PMF level.

Beyond the above three options, Deloitte Access Economics was not asked

to consider alternative project options. It is noted, however, that the

Proponent did consider a number of alternatives for the RVP. In selecting

the above three options, we understand consideration was given to:

minimisation of the final void area and volume;

achieving long term water balance in the void;

stability of the pit wall stability;

minimisation of risk of flood interaction;

support for native flora and fauna; and

meeting the void rehabilitation success criteria as outlined in Appendix 4

of the EA. This included consideration of alternative rehabilitation

construction works, flood levee design and augmentation, landform

layouts and infrastructure arrangements to achieve the objective of the

RVP.

An issue to be clarified is the geographic scope of the CBA. This is important

as it draws a line for which benefits and costs are included in the analysis

and which are excluded. For example, if the scope of the CBA is defined as

the State of Queensland, rates payable to the Central Highlands Regional

Council and royalties payable to the Queensland Government should not be

included in the analysis in Chapter 5 (the Regional Impact Analysis). As the

cost to the Project Proponents is offset by the benefits to the government,

these transfer payments cancel out.

As the CBA is being developed for compliance with Queensland Government

processes, the scope of the CBA will generally be the State of Queensland.

However, the fact that the guidelines and requirements discussed in

Chapter 2 do not fit neatly into a traditional CBA framework means that the

analysis will sometimes require consideration of effects for particular groups

within the scope. For example, Chapter 5 mostly focusses on transfer

payments within Queensland. Whenever this is the case we have attempted

to clearly identify which parties are being analysed and where they are

likely to be located.

26

4 Net benefit to

Queensland

This chapter presents the results of the CBA, which assesses the net

present value of the Submitted option to the Queensland community. This

chapter focuses on the assessment of direct impacts, and quantifying those

items wherever possible and then deriving the share of each item that is

attributable to Queensland. Assessment of the indirect impacts of the

residual void rehabilitation is presented in section 5.6.

The option that is being submitted is expected to generate a total net

economic benefit for the Queensland community of approximately $288

million (in present value terms). This net economic benefit is comprised of:

Residual value of land of $2.7 million

Reduction in flooding risks of $0.5 million

Royalties payable to the Queensland Government of $259 million

Company income tax payable to Queensland of $25 million

Local government rates payable to the Central Highlands Council of $1.5

million.

The steps in this analysis and the detailed results are described in this

chapter.

4.1 Scope of the cost benefit analysis

The scope of this CBA is defined by:

Current status quo – defining the ‘business as usual’ mining operations.

Project Case – full specification of the Submitted RVP option to be

assessed, including its implication on mining operations.

Community of interest – defining the community for which the benefits

and costs of the project should be assessed. In this case, it is the

Queensland community.

The definitions of the current status quo and the Submitted option for this

CBA are described in Sections 3.1 and 3.2 respectively. The community of

interest for the CBA is the Queensland community, and the regional

community of interest for this CBA is the Central Highlands Statistical Area

3, in accordance with that prescribed by the Queensland Government

(2017) guideline (See Section 2.2).

4.2 Identifying costs and benefits

The costs and benefits considered in this CBA are set out in Table 4.1.

In recognition of the broad range of impacts of the Submitted option, costs

and benefits have been separated into two broad groupings: those benefits

and costs that arise directly as a result of the rehabilitation program

proposed; and, those benefits and costs that arise from operating the

Ensham mine to 2031.

Within each broad grouping, costs and benefits are then further broken

down into categories according to the part of the community that it will

accrue to. For instance, the RVP Owners (Idemitsu and Bowen Investment

(Australia) Pty Ltd) will bear the rehabilitation costs and maintenance costs

27

and receive the net producer surplus from the mining operation. Royalties

and company income tax will be paid to the Queensland and Australian

Governments respectively. Other third parties that may be impacted by the

rehabilitation include landholders and residents in the regional community.

This categorisation assists in apportioning the share of the net benefits of

the RVP to the Queensland community.

Section 4.3 describes the techniques used to value each of these items and

provides the justification behind the classification of each as a net cost or

net benefit.

As recommended in the Queensland guidelines, where it is difficult to place

a value on a particular cost or benefit of the Project Case, a supplementary

qualitative measure is undertaken. These items are considered in Section

4.3. In some cases these items have been considered qualitatively because

there is expected to be no significant difference in outcomes under the

current status quo and the rehabilitation (such as noise and visual amenity)

or because there is no reliable method available to value them in these

particular circumstances (such as landform stability and farming efficiency).

Benefit and cost items considered in this CBA

Item Benefit components Cost components


RVP rehabilitation cost

Bulk earthwork costs Topsoil, amelioration, seeding and ripping costs Infrastructure removal and equipment costs Overhead salaries and site on-costs Other rehabilitation costs


Value of mine disturbance area rehabilitated into additional grazing land and other land types with biodiversity values

Flooding risks Benefits from decreased upstream and downstream flooding risk

Externalities Greenhouse carbon emissions from

rehabilitation works

Mining operation impacts

Net producer surplus Gross mining revenue

Operating costs Capital costs Taxes (Australian, state and local) Royalties

Local Government rates

Rates payable to Central Highlands Regional Council

Royalties Royalties payable to Queensland Government

Company income tax Company income tax payable to the Australian Government


28

4.3 Costs and benefits to Queensland

This section details the methods used to value the costs and benefits under

each item identified in Table 4.1, and the approach used to apportion a

share of each value to the Queensland community. The quantification of

costs and benefits has relied on a range of approaches and data sources,

including financial information and technical assessments provided by

Ensham, government data publications and non-market values published in

the literature.

All present values reported in this section are calculated using a 7% real

discount rate, are reported in 2018 price terms, and are discounted back to

the start of 2018. The period of analysis is from 2018 to 2060, based on

available forecasts of the cost of greenhouse gas emissions.

4.3.1 Open cut mine rehabilitation impacts

The impact of the rehabilitation of the residual void depends on its ultimate

effect on final landform, its ability to mitigate floods and its effect on

environmental values. The methods used to quantify the costs and benefits

associated with the rehabilitation are discussed in the sections below.

Rehabilitation costs

The total cost of rehabilitation as part of the RVP, in present value terms, is

estimated at $148.9 million for the Submitted option. This represents the

cost to Project Proponents for undertaking the RVP. Notably, the cost of

rehabilitation under the Submitted option is lower than both Options 1 and

3 which is estimated at $194.2 million and $333.1 million in present value

terms respectively.

To determine the amount of rehabilitation costs attributable to Queensland,

we need to look at the ownership structure of the Ensham Mine and

associated infrastructure. As the Ensham Mine is ultimately owned by

Idemitsu (85%)8 and Bowen Investment (Australia) Pty Ltd (15%), and

both of these companies are foreign listed companies, we have assumed

0% of the rehabilitation costs are borne by Queensland. As a result, no

rehabilitation costs are attributable to Queensland. This is a conservative

assumption as it is possible that some of the firm’s ultimate shareholders

are located within Queensland.

Having said that, understanding of the key components of the rehabilitation

work program is important to address. It gives an understanding of the

scale of works required and the resources, including labour and capital that

will be deployed by the proponent.

Rehabilitation under the proposed option is expected to take place over a

15-year period, by beginning two years earlier in 2020 and finishing in

2034.

Key components of the rehabilitation cost include:

bulk earthwork costs;

topsoil, amelioration, seeding and ripping costs;

infrastructure removal costs; and

overhead costs.

The cost of rehabilitation is largely dependent on the extent of the

earthworks required. This involves the movement of spoil and augmentation


29

of existing flood levees to create the final landforms. In addition to the

earthworks, the rehabilitation also includes costs relating to topsoil,

amelioration, seeding and ripping (for example; the planting of tree and

pasture to produce a final landform suitable for grazing), infrastructure

removal and associated overhead costs. Note, the rehabilitation cost does

not include any cost related to establishing and operating water storage

infrastructure, as was the case in the original analysis of Option 2 in the

“Economic Assessment of the Ensham Residual Void Project”.

The total cost of earthworks under the Submitted option is $103.8 million in

present value terms. The cost is similar to Option 1, $146.7 million in

present value terms, as the work required are similar in nature. That is, the

Submitted option and Option 1 involves augmenting existing flood levees to

create the final landforms and reshaping the mine walls. In contrast, the

cost under Option 3 is significantly higher, as all pits within the flood plain

need to be backfilled to its original level (i.e. the ‘Pre-mining PMF level’), in

addition to the work on flood levees.

The cost for topsoil, amelioration, seeding and ripping is estimated at $30.8

million for the Submitted option, in present value terms. Additionally,

rehabilitation will require the removal of infrastructure currently used in

sustaining the operation of the mine, such as conveyors and washing

plants. The Submitted option involves the removal of mine infrastructure

over three years from 2032 to 2034. This is estimated to cost $6.3 million

annually, or $6.5 million in total in present value terms. While the total cost

of infrastructural removal is identical under all options, the cost in present

value terms is higher under the Submitted option due to the removal taking

place earlier than in Option 1 and 3.

Associated with the labour costs are a number of overhead and on-costs,

including accommodation, travel expenses, and salary payments. Total

overhead costs, in present value terms, is $7.9 million for the Submitted

option.

Each of these costs are shown in present value terms in Table 4.2,

alongside a comparison to Options 1 and 3.

30

Calculation of rehabilitation costs

Rehabilitation Costs Submitted

option

($m, NPV)

Option 1

($m, NPV)

Option 3

($m, NPV)

Bulk earthwork costs -103.80 -146.67 -257.95

Direct seeding costs -30.80 -15.11 -19.23

Infrastructure removal

costs

-6.45 -4.60 -4.60

Overhead costs -7.85 -27.88 -51.29

Total -148.91 -194.26 -333.06

Source: Ensham (2019). Deloitte Access Economics calculations.

Benefit to workers

The workers needed for rehabilitation will be drawn from the existing

workforce of the open-cut mine. The benefits to workers from engaging in

the rehabilitation work include any wage premiums paid above the

minimum wage that they could accept elsewhere in the Central Highlands

region.

It is conservatively assumed that workers engaged in the rehabilitation

work are not expected to receive a wage premium. This assumes that

workers will receive a wage consistent with market rates. To provide an

illustration, an average net market wage for the mining industry in the

region is estimated to be $88,747.69 after tax (or $124,982.69 before tax).

This represents the average annual income in the mining industry within the

Central Highlands region as at the time of the 2016 Census (ABS) adjusted

to 2018 prices using the Private Sector Mining Wage Price Index (ABS,

2018), and discounted for predicted income tax payable using ATO (2018).

This approach assumes that there is no wage increase for rehabilitation

workers already working in the mining sector. Any wage increase accrued

from gaining employment in the rehabilitation project by people outside the

mining sector, or from other areas of Queensland, is compensation for

changes in working conditions, rather than a wage premium.

Benefit to suppliers

To estimate the net benefits to suppliers, it is necessary to examine the

extent to which rehabilitation will deliver additional producer surplus

relative to what would otherwise be received in the current status quo.

As the outcomes for suppliers under the current status quo are not readily

observable, this benefit is difficult to measure. Accordingly, it is

conservatively assumed that suppliers will earn similar margins relative to

what they could have received otherwise.


The rehabilitation work will also provide value through the creation of

alternative types of land upon the completion of mining activities. This

value primarily depends on the ability of the land created at the end of the

mining activity to support future activities of economic, environmental or

31

social value. If the land is not suitable for further use, such as agricultural

or biodiversity conservation, then it is unlikely that there would be any

substantial demand or willingness to pay for it. In this case, the value of the

land created will be zero.

Ensham advised that the land created as a result of the rehabilitation work

would include native grassland that is suitable for cattle grazing.

Chart 4.1 below presents the details of the anticipated timing of native

grassland to arise at the end of the rehabilitation work under the Submitted

option. This is dependent on timing of direct seeding work and the lag time

required for direct seeding work to settle. This information can be utilised to

ascertain the value of the residual land created during the rehabilitation.

Chart 4.1 Grassland resulting from the rehabilitation under the Submitted option

Source: Ensham (2019).

To value the land, we relied on market prices where available. Accordingly,

the social value of native grassland, has been estimated using data from

Rural Land. Specifically, Rural Land provides information on historical sales

price of farmland in Queensland by local government areas, which can be

used as an estimate for the value of a hectare of grassland in Central

Highlands. The median sale price of farmlands in Central Highlands in 2017

is $2,054 per hectare (Rural Bank, 2017). Indexing this value by the

consumer price index gives a value of $2,080.33 per hectare in 2018

(Australian Bureau of Statistics, 2018).

Applying this value to the areas of land that will be created during

rehabilitation, produced an estimate of the residual value of land of $2.74

million in present value terms.

Flooding risks

The resultant landform, post-rehabilitation, has implications for the risk of

flooding for the land surrounding the Nogoa River, an area containing

extensive agricultural and pastoral landholdings.

Two major flooding events - one in 2008 and another in 2010 - recently

affected this area, causing extensive damage to agricultural, pastoral,

industrial and residential areas. The 2008 event saw the Nogoa River height

peak at 15.36 metres, while the 2010 event set a new record at 16.05

metres (Bureau of Meteorology, 2011). This record event in 2010 damaged

32

95 per cent of Emerald’s businesses and affected over 1,000 homes in the

town (ABC, 2011).

However, it was the 2008 event that was particularly severe for the Ensham

mine operations, with entire pits and a major dragline becoming inundated.

The recovery project was estimated to have cost over $300 million

(Flagstaff Consulting, 2018). It involved pumping extensive amounts of

water from the pits; removal of mud and silt; rebuilding of access roads,

drainage and other infrastructure; recovery and rebuilding of the

submerged 1,700t dragline; and rebuilding 10km of levees to a higher level

and specification.

Assessment (Hydro Engineering & Consulting Pty Ltd, 2018) shows that the

rehabilitation will reduce downstream flooding risks for Emerald. Drawing

on annual flood exceedance probability (AEP) estimates provided by Hydro

Engineering & Consulting Pty Ltd (2018), it is assumed that, on average, a

reduction of 43 hectares of irrigated pasture land and 29 hectares of

irrigated cotton land will be affected by a flood in any given year under the

Submitted option.

To estimate the cost of flooding risks to the surrounding area, gross

margins per hectare of land were used to measure foregone revenue. For

pastures, this approach required identification of whether the pasture would

be irrigated pasture or non-irrigated pasture and the duration of inundation.

For example, the cost of flooding to non-irrigated land for a period of less

than 5-7 days was assumed to be zero, rising to $34 for inundation longer

than 5-7 days (Department of Infrastructure and Regional Development,

2001). In contrast, the burden to irrigated land is estimated to be $103 per

ha for an inundation period of less than 5-7 days and $424 for lengthier

periods.

A similar methodology was used to estimate the cost to land used for crops,

with a gross margin per hectare used to calculate the foregone profit to

landholders due to the flooding impact. Assuming most of the irrigated

crops affected are cotton, foregone profit for cotton farmers from flooding is

estimated to be $3,500 per hectare (The State of Queensland, 2018).

Based on the above estimates, the benefit from reduction in flooding risk

(relative to pre-mine conditions) in perpetuity is estimated to be $0.5

million in present value terms. It is assumed that the flooding risk changes

after rehabilitation works are completed, and so, the Submitted option

realises the benefit from 2035 and onwards. Option 1, however, is expected

to have rehabilitation works completed in 2045 and therefore realises

benefit from reduction in flooding risk from 2046 and onwards. Due to an

earlier completion of rehabilitation works under the Submitted option, the

estimated benefit under the Submitted option is higher than in Option 1,

notwithstanding both options utilising the same landform levees.

Externalities

4.3.1.6.1 Greenhouse gas emissions

The rehabilitation project will generate carbon emissions from diesel

consumption required to fuel the earthworks activities. Earthwork activity

for the Submitted option is between 2020 and 2034. The social costs of

additional greenhouse gas emissions resulting from this earthwork activity

is estimated to be $0.8 million in present value terms. This is less than both

Options 1 and 3 with an estimated cost of $1.7 million and $2.7 million in

present value terms respectively, which is the result of higher levels of

33

diesel consumption to fuel earthwork activities. To be conservative, it is

assumed that all of these costs are attributable to Queensland.9

To measure the greenhouse gas emissions produced, we used annual diesel

consumption over the life of the rehabilitation work provided by Ensham. A

total emissions figure was derived by applying average emission rates of

CO2, CH4 and N2O per litre of diesel consumed to the estimated total diesel

consumption, based on the method set out in the National Greenhouse

Accounts Factors (Australian Department of Environment and Energy,

2018).

These emissions were then valued using the forecasted European Union

Emissions Allowance Units price, based on futures derivatives published by

the European Energy Exchange. This price series was used in the review of

the NSW Energy Savings Scheme (NSW Government, 2015). The series

assumes that the cost of carbon is included in wholesale electricity prices

from 2021 onwards. When scaling up the price series developed in 2015 up

to 2018 price terms using the Consumer Price Index data (Australian

Bureau of Statistics, 2018), the estimates increase gradually from $9.60/ t

CO2-e in 2018 to $19.59/ t CO2-e in 2039. It should be noted that these

estimates are on the lower end of other forecasts, compared with those

published by the Australian Treasury for the Clean Energy Policy Scenario

and by the United States Environmental Protection Agency on the social

cost of carbon.10

4.3.1.6.2 Other externalities

Ensham has advised that other environmental, social and transport related

costs associated with the rehabilitation works will be managed within

existing approved limits set out in the rehabilitation work program. Other

externality impacts from mine rehabilitation may include:

Aboriginal and non-aboriginal heritage – Rehabilitation of the mine is

not expected to have any impacts on cultural uses. Any impacts to

heritage sites, if experienced, will be borne by the locality. However,

these costs may also be more broadly spread among individuals who

feel a cultural or historical connection to the affected sites.

Air quality impacts and ambient noise: The rehabilitation will impact air

quality and noise levels experienced within the locality. However, no

impacts are expected outside of the locality. In particular, Ensham has

indicated that technical studies undertaken as part of the RVP show

both air quality and noise impacts are within acceptable limits and in

accordance with current approvals (EA).

Biodiversity conservation impacts: the rehabilitation of the mine will

generate externality benefits through the creation of potential habitats

areas that will improve local residents’ experience of natural

ecosystems. The rehabilitation may also impact those outside of the

locality by affecting the value they attach from knowing these habitats

exist.

Traffic and transport: Traffic impacts, in terms of travel time delays

during the rehabilitation work, will mostly affect the road users within

the locality.

9 In other studies, population share is used as a proxy for attributing externality impacts to local communities such as Central Highlands and NSW. 10 Please refer to the workbooks that underpins the Guidelines for the economic assessment of mining and coal seam gas proposals, see; http://planspolicies.planning.nsw.gov.au/index.pl?action=view_job&job_id=7312.

http://planspolicies.planning.nsw.gov.au/index.pl?action=view_job&job_id=7312

34

Visual amenity: Impacts to visual amenity, from augmentation of

existing levees (negative impact – reduced amenity), or the

development of pit lakes (positive impact – improved amenity), are

likely to only affect those in the local community.

4.3.2 Mining operation impacts

The sections below detail the methods used to quantify the costs and

benefits of the Ensham open cut and underground mining operations,

assuming Ensham obtains approval for extending the life of the

underground mine from 2028 to 2031. Ensham is currently in the process of

seeking an extension of the underground mining lease to 2031.

Presentation of the benefits and costs to 2031 therefore represents current

status quo and is not impacted by the choice of the submitted rehabilitation

option.

The net producer surplus and net benefit to Queensland is driven by the

amount of labour required to rehabilitate the mines, as this affects the

calculation of payroll tax and local government rates. Based on data

provided by Ensham, the Submitted option is assumed to employ 444 full-

time equivalents (FTE). Labour required to operate the open-cut mine and

underground mine is assumed to be 6,643 FTE over the remaining life of

the mine corresponding to an average annual FTE of 474.

Net producer surplus attributable to Queensland

The net producer surplus attributable to the Queensland community is

dependent on the ownership structure of the Ensham mine and associated

infrastructure.

As noted in Chapter 1, the Ensham Mine is ultimately owned by Idemitsu

(85%)11 and Bowen Investment (Australia) Pty Ltd (15%), and both of

these companies are foreign listed companies, we have assumed 0% of the

net producer surplus are borne by Queensland. As a result, no net producer

surplus resulting from the rehabilitation is attributable to Queensland. This

is a conservative assumption as it is possible that some of the firm’s

ultimate shareholders are located within Queensland.

Having said that, it is important to understand the key components of net

producer surplus and the calculations that have been applied to estimate

these figures. These estimates inform calculations of revenue, costs,

royalties, income tax, and the overall net benefit of the rehabilitation. The

assumptions underlying each component of the total net producer surplus

estimate are documented on the following pages.


35

Calculation of total net producer surplus

Item Submitted option($m, NPV)

Revenue 3,849.82

Gross mining revenue 3,849.82

Costs -3,010.20

Operating costs -2,577.80

Capital costs -432.41

Taxes -151.38

Payroll tax -25.77

Local Government rates -1.51

Corporate tax -124.11

Royalties -258.61

Ad valorem coal royalties -258.61

Net producer surplus 429.62

Note: Figures may not sum due to rounding and some figures are rounded.


Calculating the share of net producer surplus attributable to

Queensland

Submitted option

($m, NPV)

Net producer surplus ($m, NPV) 429.62

Australian share of Project’s ownership (%) 0%

Queensland share of Australia (%) 20%

Queensland share of Project’s ownership (%) 0%

Value of net producer surplus attributable to Queensland ($m, NPV)

$0


4.3.2.1.2 Revenue

Gross mining revenue is estimated to be $3,849.8 million in present value

terms. Based on production estimates provided by Ensham, 64 Mt of

thermal coal will be produced between 2018 and 2031 from the open-cut

and underground mines.

The amount of coal produced in each year is multiplied by the forecast price

for thermal coal to give the gross revenue. The underlying prices for

projecting revenue is based on price forecasts provided by Ensham. The

proponent has assumed that price for 6322 kcal/kg thermal coal in 2018 is

36

$88 USD per tonne. This is assumed to fall to $75 USD per tonne in 2019

and then $72 USD per tonne in each of the following years to 2031. These

prices are then converted to Australian dollars using an assumed exchange

rate of $0.80 USD/AUD in 2018 and a constant rate of $0.78 USD/AUD for

each year after that. These exchange rate assumptions have been provided

by the Proponent and align with their internal financial planning and

analysis.

4.3.2.1.3 Costs

The costs to operate the open cut mine to 2022 and the underground mine

to 2031 are $2,577.8 million in present value terms. This cost estimate

encompasses the expenditure incurred when extracting coal and processing

it into saleable product, administration costs, and costs associated with

distribution and selling.

Capital costs of continued mining operations are estimated to be $432.4

million in present value terms. This value is inclusive of expenditure to

sustain site infrastructure and operations.

4.3.2.1.4 Taxes

Corporate income tax payable is estimated at $124.1 million in present

value terms for continued mining operations. The method used to develop

this estimate is outlined in Section 4.3.2.5.

Royalties for the extraction and sale of coal have been estimated by

applying a royalty rate based on the average price per tonne of coal, after

accounting for allowable deductions. A detailed description of the method

used to calculate total royalties paid is provided in Section 4.3.2.3.

Payroll tax has been estimated as a function of expected employee wage

costs, estimated with reference to ABS Census data, payroll tax threshold in

Queensland, and data on FTEs provided by the proponent.

Estimation of the local government rates payable are based on the amount

of FTE required. The Central Highlands Regional Council collects local

government rates based on a three-tiered approach, with each tier

corresponding to band of labour and local government rates payable per

annum. Detailed description of the method used is provided in Section

4.3.2.4.

Subtracting the total costs, taxes and royalties from the total gross revenue

gives a net producer surplus $429.6 million for the Submitted option in

present value terms.

Royalties

The continued operation of the open cut mine to 2022 and the underground

mine to 2031 is estimated to generate royalties for the Queensland

Government of around $258.6 million in present value terms.

The components used to estimate the royalties include:

Gross mining revenue – this is the total value received from the saleable

coal in a given year. This is calculated using the price and quantity

assumptions detailed in Section 4.3.2.1.

Allowable deductions – under the Mineral Resources Regulation 2013,

some mining expenses can be deducted from the gross revenue before

the royalties payable are calculated. This includes port and shipping

charges, coal levies, and costs relating to the late despatch of coal from

a port (demurrage).

37

Effective royalty tax rate - the royalty rate payable to Queensland is

calculated based on the average price per tonne of coal in a given year.

For the first $100 of the coal’s value, the rate is 7%. For the next $50 in

value (i.e. between $100 and $150 per tonne) the rate is 12.5%, and

for any value over this amount (>$150 per tonne) the rate is 15%.

For example, the average price per tonne of coal in 2018 is $112 AUD.

Therefore, $7 in royalties is paid for the first $100 of value, and $1.5 is paid

on the remaining value of the price ($12). The total royalties paid for each

tonne of coal sold at $112 is $8.5. The effective royalty rate paid on the

gross value of the coal sold at this price is equal to 7.6%.

Payroll tax

Payroll tax is estimated to be $25.8 million for the Submitted option in

present value terms. Estimates of payroll tax were produced using the

employee count (FTE) required to maintain open cut and underground

operations and rehabilitate the residual voids, wages payable, and

applicable payroll tax rate for the total annual wage bill.

As set by Business Queensland, the payroll tax rate is 5% on wages above

an annual threshold of $1.1 million. Wages exceed this threshold in all

years of mining operation from 2018 to 2031. For payroll tax attributable to

rehabilitation works, timing of payroll tax payable is consistent with the

profile for labour required to rehabilitate the mine, as presented Table 3.1.

Local government rates

Local government rates payable to the Central Highlands Regional Council

are estimated to be $1.51 million in present value terms under the

Submitted option.

This estimate was produced using the 2018/19 rates schedule provided by

the Central Highlands Regional Council that sets out the minimum rates

that apply to each of the differential rate categories.

Applicable minimum rates per annum for the relevant categories are:

Coal mining: 100 – 500 workers is $97,052; and

Coal mining: 501 – 1000 workers is $233,841.

In determining the number of employees for which rates should be charged,

Council is guided by data produced by the Department of Natural

Resources, Mines and Energy on the reported number of workers at open

cut and underground coal mines and to rehabilitate the residual voids.

Ensham has forecast FTE requirements that change across the operational

life of the mines and the rehabilitation period.

Local government rates have been determined in each year using the FTE

forecasts provided by Ensham and the Central Highlands Regional Council’s

rates schedule.

Corporate income tax

The company income tax payable is estimated at $124.1 million in present

value terms.

This estimate was produced by applying the 30% corporate tax rate to an

estimate of taxable income in each year. For the purpose of this analysis,

taxable income was estimated as gross mining revenue, less total cash

costs (inclusive of distribution and selling costs, washing and hauling costs,

and mine operation costs), severance/closure costs and non-cash costs

such as depreciation and amortisation. Calculations of annual income tax

38

payable also took into account accrued tax losses. The exclusion of interest

deductions indicates that these estimates are likely to be somewhat

overestimated.

On the basis that Queensland accounts for approximately 20% of the

Australian population, the share of company income tax attributable to

Queensland is estimated to be $24.8 million in present value terms.

4.4 Overall cost benefit analysis results

Given the values assigned to each item in Section 4.3, it is estimated that

the Submitted option will deliver a net economic benefit to the Queensland

community of approximately $287.4 million in present value terms.

Table 4.5 presents the overall results of the CBA, while Table 4.6 provides a

breakdown of the items by affiliation to stakeholders. Table 4.7 provides a

detailed summary of the benefit to Queensland by item based on the CBA

results presented in Table 4.5 and the attribution rates set out in Table 4.6.

Each estimate is measured in present value terms, calculated using a 7%

discount rate, in 2018 price terms, discounted back to the start of 2018.

Considering the sources of benefits to Queensland:

Net benefit was greatest for the Submitted option in the set of

rehabilitation options explored in the “Economic Assessment of the

Ensham Residual Void Project”. This is largely driven by the approach

taken to achieve the outcomes of the RVP, with minor differences on the

mining operations. These minor differences are driven by a difference in

the workforce required for rehabilitation, affecting the taxes that

Ensham has to pay.

The net benefit to Queensland is somewhat offset by the greenhouse

gas emissions that will be produced as part of the rehabilitation work.

The residual value of land under the Submitted option is valued at $2.7

million in present value terms. This option is also expected to provide a

reduction in flooding risk from up to and including a 0.1% Annual

Exceedance Probability flood event. The benefit from reduction in

flooding risk is $0.5 million in present value terms.

39

Overall CBA results


RVP

Benefits


Flooding risks 0.54

Costs

Rehabilitation cost -148.91


Net benefit -146.41


Net producer surplus# 429.62

Royalties 258.61



Total 813.85



on benefits and costs to stakeholders, including Idemitsu and its joint venture partners, Queensland community, Queensland Government, and Australia. Figures may not sum due to




40

Attribution of CBA results by item

Idemitsu & JV partners

Queensland Community

Queensland Government

Australian Government

and community

RVP

Benefits

Residual value of land 100%

Flooding risks 100%

Costs

Rehabilitation cost 100%

Cost of GHG emissions

100%

Mining operation

Net producer surplus 100%

Royalties 100%

Local Government

rates

100%

Corporate income tax 20% 80%


41

Net benefit to Queensland community ($ million)


RVP

Benefits


Flooding risks 0.54

Costs

Rehabilitation cost -


Net benefit 2.49


Net producer surplus# -

Royalties 258.61



Total 284.94



on benefits and costs to stakeholders, including Idemitsu and its joint venture partners,

Queensland community, Queensland Government, and Australia. Figures may not sum due to




42

4.5 Sensitivity analysis

The CBA results presented above are subject to the assumptions and

valuations applied to each cost and benefit, as outlined in Section 4.3.

Accordingly, it is necessary to test the sensitivity of the estimate of net

economic benefit by also considering upper and lower bound discount rates,

and varying the size of a number of parameters of interest. This provides an

insight into the range of possible outcomes that could be expected from the

rehabilitation under the Submitted option, given a range of scenarios.

Based on the recommendations in the OBPR (2016) Guideline (see Section

2.2), sensitivity analysis has been undertaken using a lower bound discount

rate of 3% and an upper bound discount rate of 10%. It is noted that this

lower bound rate of 3% is recognised in the literature as a reasonable

discount rate to use when there is an interest in incorporating

intergenerational concerns (Arrow, 2012).

Table 4.8 illustrates the variation in the overall CBA result and the net

benefits to Queensland under alternative discount rates. In all three

scenarios, the Submitted option produces net benefits to all stakeholders

and the Queensland community as a whole. That is, the benefits from the

rehabilitation are estimated to exceed the cost borne by the stakeholders,

including the quantifiable externality costs.

In particular, for the Queensland community, the estimate of net economic

benefit ranges from: $247 million to $365 million, a respective 14%

decrease and 27% increase on the central estimate produced using the

standard discount rate of 7%.

Comparison of central CBA results with alternative discount rates

3% 7% 10%

Overall CBA result benefit ($m,

NPV)

835.28 667.44 575.48

Overall net benefit for Queensland community ($m, NPV)

364.69 287.44 246.66


The second necessary component of a sensitivity analysis is to also vary the

estimates for different inputs. The importance of testing scenarios is also

recognised in the relevant CBA guidelines. We have not presented the CBA

results under variations in rehabilitation costs, and revenue and costs from

mining operations. This is because these costs are not attributable to

Queensland due to the ownership structure of the Ensham Mine.

The variations undertaken as part of this analysis include:

increasing the cost of flood damage to pasture and irrigated cotton by

30%; and

decreasing the cost of flood damage to pasture and irrigated cotton by

30%.

A comparison of the overall net benefit of proposed rehabilitation under a

3%, 7% and 10% discount rate based on variation in the parameters

discussed above are presented in Table 4.9 and Table 4.10.

43

Sensitivity analysis – comparison of overall CBA result in absolute

terms

Parameter Variation in parameter

Overall net benefit ($m, NPV)

3% 7% 10%

Central CBA n.a. 835.28 667.44 575.48

Cost of flood damage to pasture and irrigated cotton

+30% 835.80 667.60 575.56


-30% 834.75 667.28 575.41


Sensitivity analysis – comparison of overall CBA result in percentage

deviation terms from central case


Overall net benefit ($m, NPV)

3% 7% 10%

Central CBA n.a. 835.28 667.44 575.48


+30% 0.06% 0.02% 0.01%


-30% -0.06% -0.02% -0.01%


It can be seen that changes in the approach to value the cost of flood

damage to pasture and irrigated cotton does not change the overall CBA

result materially. The effect of the change is limited as the benefit/cost of

flooding risk is only a small fraction of the total net benefit.

A sensitivity analysis of the net benefit to Queensland using a 3%, 7% and

10% discount based on variations in the parameters discussed above are

presented below. Table 4.11 compares the net benefit to Queensland under

each scenario in absolute terms, and Table 4.12 compares the net benefit

to Queensland under each scenario in percentage terms against the Central

CBA results.

44

Sensitivity analysis – comparison of net benefit for Queensland in

absolute terms


Net benefit to Queensland ($m, NPV)

3% 7% 10%

Central CBA n.a. 364.69 287.44 246.66


+30% 365.22 287.60 246.73


-30% 364.16 287.27 246.59


Sensitivity analysis – comparison of net benefit for Queensland in

percentage deviation terms from central case


Net benefit to Queensland ($m, NPV)

3% 7% 10%

Central CBA n.a. 364.69 287.44 246.66


+30% 0.14% 0.06% 0.03%


-30% -0.14% -0.06% -0.03%


Similarly, results from the sensitivity analysis show immaterial changes

when considering the cost of flood damage compared to the central case.

45

5 Regional impact

analysis

This chapter sets out the RIA for the rehabilitation under the Submitted

option. The RIA is required pursuant to the Economic Impact Assessment

Guidelines, which requires an assessment of the rehabilitation project

across the local, regional and state economies, with specific focus on local

or regional employment effects.

The RIA is intended to be complementary to the CBA for Queensland, where

no single methodology is mandated but rather a combination of approaches

are encouraged if they produce the necessary information for an EIA. RIA

essentially translates the effects estimated at the State level to the impacts

on the communities located near the mine site.

There are a number of important points when considering the results of the

RIA. First, the results of the RIA are not additive to those in the state level

CBA. Rather, they are already largely covered in the CBA. Second, it is not

intended that the components of an RIA can be added together to provide a

single summary measure – each item reported below presents a different

regional effect. Finally, the RIA does not measure economic welfare

outcomes.

This chapter starts with a description of the locality, defined as the Central

Highlands Statistical Area 3 (SA3), demographics of the population within

this SA3, and a description of the small Emerald Statistical Area 2 (SA2).

This is followed by an analysis of the key areas covered by the RIA: impacts

on other local industries, and associated environmental and social effects.

5.1 Background on the locality and population

The mine is situated approximately 30km east of Emerald in Central

Queensland and is contained entirely within the Central Highlands Statistical

Area 3 (SA3). This SA3 also includes the nearby localities of Blackwater,

Bluff, Comet and the Sapphire Gemfields (Anakie, Sapphire, Rubyvale and

Willows Gemfields). The population of the entire SA3 has been used to

model the impact of the rehabilitation, as labour and other expenditure is

likely to be concentrated throughout this area.

The population for the SA3 was 28,960 at the time of the 2016 Census

(ABS, 2016), indicating a population decline of approximately 0.5% per

annum between 2011 and 2016. This is well below the population growth

for the State as a whole, which was approximately 1.7% per annum from

2011 to 2016. However, with the local economy continuing to transition

following a strong mining boom, annual population growth is forecast to

recover to 1.1% to 2021.

Several other key regional statistics are included in Table 5.1.

46

Population characteristics of the Central Highlands SA3

2006 2011 2016 2006-2016 % change

Population 28,256 29,662 28,960 2.5%

Mean household size 2.7 2.8 2.7 -

Median age 31 31 n.a.

Total occupied private dwellings 12,046 13,611 14,126 17.27%

Median housing loan repayment ($/month)

1,332 1,998 1,842 32.28%

Median rent ($/week) 90 112 170 88.9%

Median household income ($/week) – Lower Hunter SA3

1,534 1,951 1,788 16.56%

Median household income ($/week) - NSW

1,033 1,235 1,402 35.72%

Source: ABS 2016 Census of Population and Housing, Time Series Profile, Cat. 2003.0.

Mining is the major industry of employment in the locality, employing

24.3% of the employed population. This is much higher than in Queensland

as a whole, where just 2.3% of the employed population work in the mining

sector. The agriculture, forestry and fishing, and retail trade industries are

the next highest employers within the SA3, at 12.8% and 8.1%

respectively.

A breakdown of the average weekly wage by industry is provided in Figure

5.1. As illustrated, ‘Mining’ and ‘Electricity, Gas, Water and Waste Services’

are the two highest paying industries in the locality. ‘Mining’ employs the

most people in the locality, totalling to 3,277 people, while ‘Electricity, Gas,

Water and Waste Services’ employs 290 people.

Figure 5.1 Central Highlands SA3 average weekly personal income by industry –

2016 ($2016)

Source: ABS 2016 Census.

47

According to the Commonwealth Department of Employment small area

labour markets data, the unemployment rate for the December 2017

quarter in the Emerald Statistical Area 2 (SA2) was 3.7%. This compares to

a state-wide average of 6.1%, and the average for the broader Central

Highlands region as a whole of 4.5% (Department of Jobs and Small

Business, 2017).

As shown in Figure 5.2, the overall level of unemployment across the

Central Highlands SA3 exhibits significant variation when viewed at an SA2

level. Emerald and the Central Highlands West SA2s have low

unemployment rates of 3.7% and 3.2% respectively; the Central Highlands

East SA2 is much higher at 8.1%. This is likely attributable to the relatively

low concentration of mining activity in the eastern section of the SA2.

Figure 5.2 Unemployment (%) by SA2 in the Central Highlands Statistical Area

Source: Australian Department of Jobs and Small Business (2017).

Unemployment in the locality has followed a similar trend across each SA2,

with the unemployment rate declining since its peak at 5.6% in the

September quarter of 2015, but has since stabilised between 4.2% and

4.5% since September 2016.

5.2 Local employment effects

One of the primary effects of the proposed rehabilitation and Ensham mine

operations on the locality is the generation of employment. The mining

operating and rehabilitation of the residual voids will both employ people

directly and generate flow on employment.

Flow on employment is generated as the expenditure on direct employment

in the local area creates additional employment within other industries.

These effects are generally estimated using Computable General Equilibrium

48

(CGE) modelling. This section deals with direct employment effects only,

while the indirect impacts are presented in Section 5.6.

If the Ensham mine does not operate and the rehabilitation work is not

undertaken, many of the employees of Ensham would likely find

employment elsewhere. These employees may work a similar role at a

different mine, or find employment within another industry. It is necessary,

therefore, to consider the net employment effects on the community.

The net benefit of employment is the additional income that the individual

would receive from working in the mine and engaging in the rehabilitation

rather than being employed elsewhere in the local economy.

The approach to measuring net effects involves:

Identifying direct employment of local residents created by the mining

operations and the rehabilitation under the Submitted option.

Comparing average incomes for employees working in the mine and

engaging in the rehabilitation against the average incomes in the

locality to estimate a net increase in income.

Average income across all industry sectors in the locality was sourced from

the 2016 ABS Census, and adjusted to 2018 prices using the Wage Price

Index (ABS 2018).

Average income data was adjusted to FTE terms, based on the reported

breakdown of full-time to part-time employees for the mining industry and

all industries in the locality (ABS 2016). It was assumed that part-time

employees would earn, on average, 50% of the income of full-time

employees in all cases. Estimates of net (post-tax) income were then

developed based on income tax estimates produced using a tax calculator.

Table 5.2 compares the average income of employees engaging in the

rehabilitation with the average income of those working elsewhere in the

mining industry locally.

Under the Submitted option, the direct employment from the locality to

operate the mine will be an average 175 FTE annually between 2018 and

2031. The rehabilitation of the open cut mine is expected to, on average,

directly employ 11 FTE annually between 2020 and 2034 from the locality.

49

Estimated rehabilitation local employment effects relative to mining

industry employment in the locality

In locality Outside locality

Direct employment (FTE) 11 19

Average net income for rehab employees (FTE) ($/year)

88,748 88,748

Average net income in mining industry (FTE) ($/year)

88,748 88,748

Average increase in net income per employee (FTE) ($/year)

- -

Increase in net income per year due to direct employment ($m)

- -

FTE equivalent - -


Estimated mining operation local employment effects relative to

mining industry employment in the locality



Average net income for mining operation employees (FTE) ($/year)

88,748 88,748

Average net income in mining

industry (FTE) ($/year)

88,748 88,748


- -


- -

FTE equivalent - -


Table 5.4 compares average income of employees engaging in the

rehabilitation with the average income across all industries in the locality.

50

Estimated rehabilitation option local employment effects relative to

average employment in the locality



Average net income for rehab employees (FTE) ($/year)

88,748 88,748

Average net income in locality (FTE) ($/year)

46,449 46,449


42,298 42,298


0.46 0.79

FTE equivalent 10 17


By working on the rehabilitation, employees are expected to earn an

additional $42,298 per annum over the average income of all industries in

the locality. This implies that the rehabilitation of the mine will boost net

income in the locality through direct employment.

Estimated mining operation local employment effects relative to

average employment in the locality



Average net income for mining operation employees (FTE) ($/year)

88,748 88,748

Average net income in locality (FTE) ($/year)

46,449 46,449


42,298 42,298


7.39 12.68

FTE equivalent 159 273


The net local employment effect is estimated as the employment income

that is in addition to average wages in the locality. This includes the net

employment effect from the rehabilitation works and the mining operations.

An additional $7.4 million in employment income is generated for the

locality from operating the mine between 2018 and 2031. For the

undertaking of the rehabilitation, the Submitted option generates an

additional $0.5 million of employment income in the locality per year,

between 2020 and 2034.

51

5.3 Non-labour expenditure effects

In addition to employment, the other major economic effect of the

rehabilitation and the operation of the Ensham mine on the locality is

expenditure on other, non-labour inputs. For example, the rehabilitation of

the open cut mine requires a range of non-labour inputs including hire of

machinery for earthworks, diesel, and payments to contractors. Expenditure

on these inputs generates local economic activity.

Table 5.6 shows the average annual local expenditure on non-labour inputs

under the rehabilitation and under mining operations.

Estimated rehabilitation and mining operation local operating

expenditure effects

Total direct expenditure (average annual $m)


Rehabilitation 2.37 11.84

Mining operations 55.27 276.04


For the purposes of this analysis, estimated effects related to non-labour

expenditure is restricted to the direct expenditure in the local area. Of the

mine’s non-labour expenditure, 17% is estimated to be spent within the

locality, based on the local expenditure data provided by Ensham (2019).

Specifically, the average annual expenditure on non-labour inputs is

estimated to be $2.4 million for the Submitted option.

Assuming this local supplier share is maintained, it is estimated that

approximately the following will be spent in the locality for rehabilitating the

open-cut mine and maintaining the mine operations:

$55.3 million per year between 2018 and 2019;

$57.7 million per year between 2020 and 2031; and

$2.4 million per year between 2032 and 2034.

The rehabilitation is not likely to materially impact other local industries,

such as agriculture, tourism or business travel, given that the Ensham Mine

is likely to repurpose the existing workforce for the continued operation and

the rehabilitation of the mine.

5.4 Effects on other local industries

The rehabilitation of residual voids post-cessation of a mining project can

have effects on other local industries, even if there are no direct monetary

links between the rehabilitation work program and the local economy. This

may occur through the purchase of goods and services as inputs in the

project, the generation of additional labour earnings or through ongoing

benefits to existing landholders surrounding the RVP.

The 2017 economic impact assessment guidelines (Department of State

Development, 2017) provide some examples where a mining related project

can have effects on local industries:

Subsequent stimulus to the regional economy;

52

Displacement of a specific land use;

Effects on tourism and business travel; or

Employment change through direct labour inputs, indirect labour inputs,

and the projected effects on the local economy including housing, labour

costs and services.

The Guidelines require a qualitative discussion of these issues.

The use of land for mining will be displaced by a landform which will

generate areas for grazing and nature conservation. Furthermore, the

resultant landform is expected to reduce the flooding level when compared

with existing flood levels.

Employment effects from the rehabilitation of residual open-cut voids and

the continued operation of the mine are expected to be small relative to the

current available labour force in the locality, as the workers required are to

be drawn from the existing workforce of the mine. Therefore, there will not

be any material change to supply or demand in local markets and so it is

not expected that there will be any short run market adjustments in the

cost of living for local residents. It is not anticipated that the rehabilitation

will have any other effects on business travel, tourism or other local

industries.

5.5 Environmental and social effects

Externalities (both positive and negative) are a major way in which the

locality is potentially affected by the rehabilitation. For example,

greenhouse gas emissions and flooding impacts generated by the

rehabilitation affect those normally residing in the locality. Similarly, any

infrastructure investment made by Ensham as part of the rehabilitation

work also benefits those normally residing in the locality.

Of the environmental effects discussed in Section 4.3.1, those that create

local effects are:

greenhouse gas emissions;

flooding; and

residual value of land.

These environmental effects will be fully felt within the local area and hence

100% of the quantified impact is attributable to the locality. The total cost

of the greenhouse gas emission to the locality is estimated to be $0.8

million for the Submitted option in present value terms. This is equivalent

to an estimated average annual cost to the locality of $108,000 over the

rehabilitation period.

The residual value of land is the most notable local benefit, amounting to

$2.7 million in present value terms. The other benefit is the reduced

flooding risks, which accrues entirely to the locality. Economic values

created from the reduction in flood impacts are estimated at $0.5 million in

present value terms.

Ensham has outlined that the environmental and social related costs

associated with the rehabilitation works will be managed within existing

approved limits set out in the rehabilitation work program. Impacts to the

locality of mine rehabilitation may include:

Aboriginal and non-aboriginal heritage – Rehabilitation of the mine is

not expected to have any impacts on cultural uses. Any impacts to

53

heritage sites, if experienced, will be borne by the locality. However,

these costs may also be more broadly spread among individuals who

feel a cultural or historical connection to the affected sites.

Air quality impacts and ambient noise: The rehabilitation will impact air

quality and noise levels experienced within the locality. However, no

impacts are expected outside of the locality.

Biodiversity conservation impacts: the rehabilitation of the mine will

generate externality benefits through the creation of potential habitat

areas that will improve local residents’ experience of natural

ecosystems. The rehabilitation may also impact those outside of the

locality by affecting the value they attach from knowing these habitats

exist.

Traffic and transport: Traffic impacts, in terms of travel time delays

during the rehabilitation work, will mostly affect the road users within

the locality.

Visual amenity: Impacts to visual amenity, from augmentation of

existing levees (negative impact – reduced amenity), or the

development of pit lakes (positive impact – improved amenity), are

likely to only affect those in the local community.

5.6 Second round and flow-on effects

The DSDMIP 2017 guideline provides approaches such as CGE Modelling,

Input-Output Analysis or Partial Equilibrium Analysis can be used for

quantifying second round and flow on effects to a region. The guideline

further states that “qualitative analysis may be used to describe indirect

impacts where quantitative information is limited or unavailable” (DSDMIP,

2017).

We have used a CGE model to estimate the flow-on effects of the capital

investment, operational expenses required to rehabilitate the residual voids

under the Submitted option for Central Highlands and the broader

Queensland economy over time.

The CGE modelling has been undertaken using the same inputs and

assumptions that underpin the CBA analysis. This ensures consistency in

the methodology used to assess the broader economic impact of the

Submitted option. As such, results from the CGE modelling are impacted by

the same data limitations experienced in the CBA analysis.

5.6.1 Analytical methodology and data

CGE analysis is an extension of input output (IO) analysis in that it is based

on a database that incorporates IO tables and the transactional detail

between economic agents. In addition, CGE models also incorporate a

system of equations and modelling parameters, based on a widely accepted

body of economic theory, that model competition for resources (particularly

in labour and capital markets) between economic agents and allows for

economy-wide modelling impacts incorporating any “crowding-out” impacts

of the development.

Partial equilibrium is a subset of CGE analysis where it is developed to

specifically investigate a particular market. The use of a partial equilibrium

model limits the quantification of the impacts to the market of interest, in

this case the construction industry and mining industry, with no ability to

include impacts on other sectors of the economy.

Of particular importance to this analysis is that IO modelling would assume

an unconstrained workforce which is an unrealistic assumption given the

nature and region of this Project. Conversely, the CGE modelling framework

54

and Partial Equilibrium analysis captures the labour resource constraints

that operate in a region.

More technical detail regarding CGE modelling can be found in Appendix B.

The economy-wide impacts of the Submitted option has been projected

using the Deloitte Access Economics Regional General Equilibrium Model

(DAE-RGEM). The model projects macroeconomic aggregates such as GDP,

employment and industry gross value added for the options against a

reference case for each of the modelling years. The results are evaluated

from 2018-2034 over the construction period, reflecting both the

construction and operations associated with rehabilitate the residual void.

The model was disaggregated and customised to match the attributes of the

Central Highlands regional economy. This was done using information from

the most recent 2016 Census on the workforce population.

For the purpose of the modelling, the ‘Central Highlands’ region is defined

as the Central Highlands Local Government Area (LGA) as this is where the

activity is expected to occur. Modelling has been undertaken for the

following economic regions:

Central Highlands area — includes the Central Highlands Local

Government Area (LGA)

Queensland — includes the Central Highlands area and rest of the

State

The Rest of Australia.

The inputs used in the CGE modelling are presented in Table 5.7. Data was

supplied by Ensham relating to the capital expenditure and operational

expenditure required to rehabilitate the residual voids under the Submitted

option. This was modelled as increased investment in the Central Highlands

regional economy over the period 2018 to 2034. It should also be noted

that this investment is not assumed to add directly to the productive capital

stock of the economy; instead, it just reflects increased output.

CGE Inputs for the Submitted option

Submitted option

($m, NPV 2018-2034)

Capital expenditure 142.45

Operational expenditure 6.45

Total 148.91


Note: NPV calculated using a 7% real discount rate. Figures may not sum due to rounding.

The results from the economic impact analysis are presented as absolute

deviations in output, employment and industry gross value added from a

business as usual scenario where the residual voids in the Ensham Mine are

not rehabilitated.

55

Based on the inputs provided, the modelling gauges the wider economic

impacts of the residual void Options at two levels:

Direct impacts — the economic gains associated with the ‘core’

rehabilitation works, under the Submitted option.

Indirect, induced and crowding out impacts — the economic gains

in related upstream or downstream industries where the benefits

associated with increased construction activity are typically the highest.

As outlined above, the CGE modelling also captures any crowding out of

activity in other sectors of the economy as a result of the Submitted

option.

Because of these two distinct elements, the results presented in this

Chapter may not necessarily be comparable to the employment projections

from the residual voids rehabilitation outlined in other areas of this

Economic Impact Analysis, which take a narrower financial view.

5.6.2 Economic impacts – GRP

The economic impacts of the Submitted option on the Central Highlands and

broader Queensland economy are presented in this section, focusing on the

absolute deviation in economic output, employment and industry value

added. The rehabilitation option for the Submitted option is estimated to

lead to an additional of $12.9 million in present value terms over the period

2018 to 2034, under a 7% discount rate for the Central Highlands economy,

at an average of $1.6 million per year.

Chart 5.1 shows the profile of deviations for Central Highlands under the

Submitted option over the period 2018 to 2034. For the Central Highlands

regional economy, the impacts are primarily driven by the capital

expenditure for the rehabilitation of the residual void and partly by the

added operational costs by the end of the rehabilitation period from 2032 to

2034.

More broadly, the modelling indicates that Queensland’s gross state product

(GSP) would increase by $16.6 million, in present value terms, over the

period 2018-2034, under a 7% discount rate, reflecting a small degree of

positive spill over impacts in the rest of Queensland (Table 5.8).

Chart 5.1 Impact on gross regional product by the submitted option, Central

Highlands


56

Impact on Gross Regional Product by the submitted option across

regions

Submitted option

($m, NPV 2018-2034)

Central Highlands 12.92

Rest of Queensland 3.63

Queensland 16.55


5.6.3 Employment impacts

Chart 5.2 shows that the deviation of employment impacts for the Central

Highlands over the construction period. It is estimated that the Submitted

option will create additional 25 full-time equivalent (FTE) jobs on average,

per year over the period 2020 to 2034 in the Central Highlands regional

economy. The increased employment impacts are driven by the amount of

expenditure required for construction of the final landforms over time.

Considering the employment impacts to the broader Queensland economy,

the modelling indicates that there are some positive impacts to the rest of

Queensland, over the construction period for the Submitted option (see

Table 5.9).

Chart 5.2 Impact on full-time equivalent employment by the submitted option,

Central Highlands


57

Impact on full-time equivalent employment by the submitted option

across regions

Submitted option

(annual average 2020-2034)

Central Highlands 25

Rest of Queensland 15

Queensland 40


Note: Queensland is the sum of Central Highlands and rest of Queensland. Figures may not sum

due to rounding.

5.6.4 Sectoral impacts

Chart 5.3 below shows the deviation in gross value added (GVA) across

sectors by the Submitted option in the Central Highlands regional economy.

As construction industry tracks closely with aggregate investment, it sees

highest economic activity increase by $22 million in present value terms for

the Submitted option, over the period 2018 to 2034. This is primarily driven

by the capital expenditure that directly supports activity in the construction

industry, which is reflected in the increased GVA. This, in turn, creates

additional demand in industries that supply construction with intermediate

inputs, such as heavy manufactures and financial, business and government

services.

Some industries, however, experience crowding out overall. That is, the

capital expenditure leads to reduced activity in some parts of the economy

as it draws productive resources away from them (either directly, or

through increased demand for inputs from other industries). For example,

coal mining industry will experience the highest decrease in economic

activity by $9 million, in present value terms, over the construction period.

This decreased economic activity can be explained by the increased activity

in the construction industries, which are drawing away resources from other

industries.

58

Chart 5.3 NPV of impact on Gross Value Added ($ million) by industry for the

submitted option, Central Highlands


Note: NPV calculated over the period from 2018-34 for the Submitted option.

Though, there are decreases in GVA in some industries, the additional

activity due to the increased domestic expenditure has a net positive impact

in the Central Highlands for the Submitted option.

59

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Mine Residual Void Project Stage 3 Catchment Hydrology and Flood

Modelling.

61

Hydro Engineering & Consulting Pty Ltd. (2018). Final Report - Ensham Coal

Mine Residual Void Project Stage 3 Void Water Quantity and Quality

Balance Modelling.

KPMG. (2017). Central Highlands Economic Master Plan.

KPMG. (2017, September). Central Highlands Economic Master Plan - An

Economic Master Plan to 2047 and Action Plan for 2017-2022.

Retrieved from https://chdc.com.au/media/2018/02/CHEMP-Final-

Report-1-September-2017.pdf

Marsden Jacob Associates. (2018, October 15).

NSW Department of Planning and Environment. (2018, April). Technical

Notes supporting the Guidelines for the Economic Assessment of

Mining and Coal Seam Gas Proposals.

NSW Government. (2015). Guidelines for the economic assessment of

mining and coal seams gas proposals, December.

NSW Government. (2015). Review of the NSW Energy Savings Scheme,

Part 2: Options Paper. Retrieved from

http://www.resourcesandenergy.nsw.gov.au/__data/assets/pdf_file

/0010/558865/part-2-options-paper-april-2015.pdf

OBPR. (2016). Guidance note - Cost Benefit Analysis. Retrieved from

https://www.pmc.gov.au/sites/default/files/publications/006-Cost-

benefit-analysis.pdf

OD Hydrology. (2018, October 17). Re: Crop irrigation requirements -

Emerald Irrigation Area.

Qld Department of Agriculture and Fisheries. (n.d.). Citrus Harvesting,

Yields and Prices. Retrieved from

https://www.daf.qld.gov.au/business-priorities/plants/fruit-and-

vegetables/fruit-and-nuts/citrus/harvesting,-yields-and-prices

Queensland Department of Natural Resources, Mines and Energy. (2018).

Permanent Water Trading annual Report Period 1 July 2017 to 30

June 2018. Retrieved from Transfer of Ownership - Water Only:

https://www.dnrme.qld.gov.au/__data/assets/pdf_file/0016/14013

16/pwtr-supplemented-annual-2017-18.pdf

Queensland Treasury. (2015). Project Assessment Framework - CBA .

Retrieved from https://s3.treasury.qld.gov.au/files/paf-cost-benefit-

analysis.pdf

Rural Bank. (2017). Australian Farmland Values 2017 - Queensland.

Retrieved from

https://www.ruralbank.com.au/assets/responsive/pdf/publications/

afv-qld-2017.pdf

Ruralco Water. (2018, September 27). Water markets. Retrieved from

Trading zone information: https://www.ruralcowater.com.au/

Shafiee, S., Nehring, M., & Topal, E. (2009). Estimating average total cost

of open pit coal mines in Australia. Australian Mining Technology

Conference 27-28 October , 134-145.

SunWater. (2017). Nogoa Mazkenzie Water Scheme.

62

SunWater. (2018, October 5). Nogoa Mackenzie. Retrieved from

http://www.sunwater.com.au/schemes/nogoa-mackenzie

Treasury, N. (2017). NSW Government Guidelines for Economic Appraisal.

Retrieved from https://arp.nsw.gov.au/sites/default/files/TPP17-

03_NSW_Government_Guide_to_Cost-Benefit_Analysis_0.pdf

63

Appendix A: Checklist

Queensland DSDMIP (2017). “Economic Impact Assessment

Guideline

Table A.1 Key issues mentioned in the DSDMIP Guideline

DSDMIP Guidelines Addressed Reference

Define the Project Yes 3.2

Define the base case

Methodology Yes 2

Use best current data available Yes 2

Use standard and consistent terms and

methodologies

Yes 2

Cover the full life-cycle of the project Yes 2

Specify the modelling methodologies Yes 2

Adopt an appropriate discount rate Yes 0

Document all key assumptions and their rationale Yes 0

Explain the methods used to gather information Yes 2

Describe how key impacted stakeholders and communities were consulted

No n.a.

Express monetary values in Australia dollars adjusted to a common date

Yes 2

Use risk management framework to focus on the impacts with the highest probability and consequential impacts

No n.a.

Consider cumulative impacts of other developments in the region, where feasible

No n.a.

Cost Benefit Analysis

Identifying economic outcomes Yes 0

Capital and operational expenditure Yes 4.3.1

Project revenues Yes 4.3.2

Direct impacts on Gross Regional Product Yes n.a.

Any relevant royalties, taxes and duties Yes 4.3.2.1.4

Any relevant site remediation costs Yes 4.3.1

Sources of goods and services Yes 5.2, 5.3

Workforce and labour market impacts Yes 5.2

Identify environmental outcomes Yes 4.3.1

Aboriginal cultural heritage Yes 4.3.1.6

Air quality Yes 4.3.1.6

Ambient noise Yes 4.3.1.6

Biodiversity Yes 4.3.1.6

Flooding Yes 4.3.1.6

64

DSDMIP Guidelines Addressed Reference

Greenhouse gas Yes 4.3.1.6

Groundwater/surface water No n.a.

Non-Aboriginal heritage Yes 4.3.1.6

Traffic Yes 4.3.1.6

Visual amenity Yes 4.3.1.6

Identify social outcomes Yes 5

Workforce and labour market impacts Yes 5.1, 5.2

Direct and indirect full-time-equivalent job numbers during construction and operation

Yes 5.2

Recreational impacts Yes 5.4

Tourism impacts Yes 5.4

Apply a monetary value to identified outcomes or provide qualitative analysis

Yes 4.3.1

Discount all the impacts back to a common time period

Yes 4.4

Sum the present values of the benefits and costs to estimate net benefits or costs

Yes 4.4

Sensitivity analysis Yes 4.5

Regional impact analysis Yes 5

Identify key stakeholders and (local, region, state, national) communities of interest

Yes 5

Local business and industry content opportunities Yes 5

Source locations of employees and contractors Yes 5

Level of stimulus to the regional and state economy

Yes 5

Level and location of employment change through:

Yes 5

Direct labour inputs Yes 5

Indirect labour inputs Yes 5

The projected effects on the local economy (includ8ng housing, labour costs and services)

Yes 5

Demands for other essential services and facilities

Yes 5

Expected timing and geographic distribution of impacts

Yes 5

Any relevant positive and negative externalities No n.a.

65

Queensland Treasury (2015). “Project Assessment Framework –

Cost Benefit Analysis Guideline”

Table A.2 Key issues mentioned in Queensland Treasury Guideline (2015)

Queensland Treasury Guidelines Addressed Reference

Identify the outcome sought Yes 3

Develop the project and policy options

Status quo Yes 3.1

Other options Yes 3.2

Undertake a preliminary evaluation of the options 4.2

Evaluate project options in detail 4.3.1, 4.3.2

Cost benefit analysis Yes

Determine key assumptions Yes 4.3.1, 4.3.2

Identify and estimate the expected economic benefits and costs of the project

Yes

Quantify impacts that can be valued as costs and benefits

Yes 4.3.1, 4.3.2

Identify the unquantifiable environmental costs and benefits

and the result of any cost effectiveness analysis undertaken

Yes 4.3.1.6

Address findings of any

Environmental Impact Assessment undertaken

Yes 4.3.1

Identification of the distribution

of the environmental benefits and costs

Yes 5

Address assumptions made regarding the inclusion or

exclusion of certain costs and benefits

Yes 4.3.1, 4.3.2

Calculate the net present economic value Yes 4.4

Assess risks and sensitivities Yes 4.5

Select preferred option

Cost benefit analysis conclusion, recommendations and checklist

No n.a.

66

Appendix B: CGE

modelling

The Deloitte Access Economics – Regional General Equilibrium Model (DAE-

RGEM) is a large scale, dynamic, multi-region, multi-commodity computable

general equilibrium model of the world economy. The model allows policy

analysis in a single, robust, integrated economic framework. This model

projects changes in macroeconomic aggregates such as GDP, employment,

export volumes, investment and private consumption. At the sectoral level,

detailed results such as output, exports, imports and employment are also

produced.

The model is based upon a set of key underlying relationships between the

various components of the model, each which represent a different group of

agents in the economy. These relationships are solved simultaneously, and

so there is no logical start or end point for describing how the model

actually works.

Figure B.1 shows the key components of the model for an individual region.

The components include a representative household, producers, investors

and international (or linkages with the other regions in the model, including

other Australian States and foreign regions). Below is a description of each

component of the model and key linkages between components. Additional

technical detail is also provided.

Figure B.1 Key components of DAE-RGEM

67

DAE-RGEM is based on a substantial body of accepted microeconomic

theory. Key assumptions underpinning the model are:

The model contains a ‘regional consumer’ that receives all income from

factor payments (labour, capital, land and natural resources), taxes and

net foreign income from borrowing (lending).

Income is allocated across household consumption, government

consumption and savings so as to maximise a Cobb-Douglas (C-D)

utility function.

Household consumption for composite goods is determined by

minimising expenditure via a CDE (Constant Differences of Elasticities)

expenditure function. For most regions, households can source

consumption goods only from domestic and imported sources. In the

Australian regions, households can also source goods from interstate. In

all cases, the choice of commodities by source is determined by a

CRESH (Constant Ratios of Elasticities Substitution, Homothetic) utility

function.

Government consumption for composite goods, and goods from

different sources (domestic, imported and interstate), is determined by

maximising utility via a C-D utility function.

All savings generated in each region are used to purchase bonds whose

price movements reflect movements in the price of creating capital.

Producers supply goods by combining aggregate intermediate inputs

and primary factors in fixed proportions (the Leontief assumption).

Composite intermediate inputs are also combined in fixed proportions,

whereas individual primary factors are combined using a CES production

function.

Producers are cost minimisers, and in doing so, choose between

domestic, imported and interstate intermediate inputs via a CRESH

production function.

The model contains a more detailed treatment of the electricity sector

that is based on the ‘technology bundle’ approach for general

equilibrium modelling developed by ABARE (1996).

The supply of labour is positively influenced by movements in the real

wage rate governed by an elasticity of supply.

Investment takes place in a global market and allows for different

regions to have different rates of return that reflect different risk

profiles and policy impediments to investment. A global investor ranks

countries as investment destinations based on two factors: global

investment and rates of return in a given region compared with global

rates of return. Once the aggregate investment has been determined for

Australia, aggregate investment in each Australian sub-region is

determined by an Australian investor based on: Australian investment

and rates of return in a given sub-region compared with the national

rate of return.

Once aggregate investment is determined in each region, the regional

investor constructs capital goods by combining composite investment

goods in fixed proportions, and minimises costs by choosing between

domestic, imported and interstate sources for these goods via a CRESH


Prices are determined via market-clearing conditions that require

sectoral output (supply) to equal the amount sold (demand) to final

users (households and government), intermediate users (firms and

investors), foreigners (international exports), and other Australian

regions (interstate exports).

For internationally-traded goods (imports and exports), the Armington

assumption is applied whereby the same goods produced in different

68

countries are treated as imperfect substitutes. But, in relative terms,

imported goods from different regions are treated as closer substitutes

than domestically-produced goods and imported composites. Goods

traded interstate within the Australian regions are assumed to be closer

substitutes again.

The model accounts for greenhouse gas emissions from fossil fuel

combustion. Taxes can be applied to emissions, which are converted to

good-specific sales taxes that impact on demand. Emission quotas can

be set by region and these can be traded, at a value equal to the carbon

tax avoided, where a region’s emissions fall below or exceed their

quota.

B.1. The representative household

Each region in the model has a so-called representative household that

receives and spends all income. The representative household allocates

income across three different expenditure areas: private household

consumption; government consumption; and savings.

Going clockwise around Figure B.1, the representative household interacts

with producers in two ways. First, in allocating expenditure across

household and government consumption, this sustains demand for

production. Second, the representative household owns and receives all

income from factor payments (labour, capital, land and natural resources)

as well as net taxes. Factors of production are used by producers as inputs

into production along with intermediate inputs. The level of production, as

well as supply of factors, determines the amount of income generated in

each region.

The representative household’s relationship with investors is through the

supply of investable funds – savings. The relationship between the

representative household and the international sector is twofold. First,

importers compete with domestic producers in consumption markets.

Second, other regions in the model can lend (borrow) money from each

other.

Some detail:

The representative household allocates income across three different

expenditure areas – private household consumption; government

consumption; and savings – to maximise a Cobb-Douglas utility

function.

Private household consumption on composite goods is determined by

minimising a CDE (Constant Differences of Elasticities) expenditure

function. Private household consumption on composite goods from

different sources is determined by a CRESH (Constant Ratios of

Elasticities Substitution, Homothetic) utility function.

Government consumption on composite goods, and composite goods

from different sources, is determined by maximising a Cobb-Douglas

utility function.

All savings generated in each region are used to purchase bonds whose

price movements reflect movements in the price of generating capital.

B.2. Producers

Apart from selling goods and services to households and government,

producers sell products to each other (intermediate usage) and to investors.

Intermediate usage is where one producer supplies inputs to another’s

production. For example, coal producers supply inputs to the electricity

sector.

69

Capital is an input into production. Investors react to the conditions facing

producers in a region to determine the amount of investment. Generally,

increases in production are accompanied by increased investment. In

addition, the production of machinery, construction of buildings and the like

that forms the basis of a region’s capital stock, is undertaken by producers.

In other words, investment demand adds to household and government

expenditure from the representative household, to determine the demand

for goods and services in a region.

Producers interact with international markets in two main ways. First, they

compete with producers in overseas regions for export markets, as well as

in their own region. Second, they use inputs from overseas in their

production.

Some detail:

Sectoral output equals the amount demanded by consumers

(households and government) and intermediate users (firms and

investors) as well as exports.

Intermediate inputs are assumed to be combined in fixed proportions at

the composite level. As mentioned above, the exception to this is the

electricity sector that is able to substitute different technologies (brown

coal, black coal, oil, gas, hydropower and other renewables) using the

‘technology bundle’ approach developed by ABARE (1996).

To minimise costs, producers substitute between domestic and imported

intermediate inputs is governed by the Armington assumption as well as

between primary factors of production (through a CES aggregator).

Substitution between skilled and unskilled labour is also allowed (again

via a CES function).

The supply of labour is positively influenced by movements in the wage

rate governed by an elasticity of supply (is assumed to be 0.2). This

implies that changes influencing the demand for labour, positively or

negatively, will impact both the level of employment and the wage rate.

This is a typical labour market specification for a dynamic model such as

DAE-RGEM. There are other labour market ‘settings’ that can be used.

First, the labour market could take on long-run characteristics with

aggregate employment being fixed and any changes to labour demand

changes being absorbed through movements in the wage rate. Second,

the labour market could take on short-run characteristics with fixed

wages and flexible employment levels.

B.3. Investors

Investment takes place in a global market and allows for different regions

to have different rates of return that reflect different risk profiles and policy

impediments to investment. The global investor ranks countries as

investment destination based on two factors: current economic growth and

rates of return in a given region compared with global rates of return.

Some detail:

Once aggregate investment is determined in each region, the regional

investor constructs capital goods by combining composite investment

goods in fixed proportions, and minimises costs by choosing between

domestic, imported and interstate sources for these goods via a CRESH


70

B.4. International

Each of the components outlined above operate, simultaneously, in each

region of the model. That is, for any simulation the model forecasts changes

to trade and investment flows within, and between, regions subject to

optimising behaviour by producers, consumers and investors. Of course,

this implies some global conditions must be met such as global exports and

global imports are the same and that global debt repayments equals global

debt receipts each year.

71

Appendix C:

Calculation notes

There was a calculation error in the estimation of flooding risk as presented

in the report: “Economic Assessment of the Ensham Residual Void Project”.

The flooding risk figures were an overestimation of Options 1 and 2.

Flooding risk figures for Option 3, however, did not require amendment.

The original and the revised figures are presented in Table C.1 below.

Table C.1 Amended flooding risk figures

Original Revised

Option 1 Reduction of

irrigated pasture

land

1,185 hectares 43 hectares

Reduction of

irrigated cotton land

790 hectares 29 hectares

Benefit from

reduction in flooding

risk in perpetuity

$7.02 million $0.25 million

Option 2

(Submitted

option)

Reduction of

irrigated pasture

land

1,185 hectares 70 hectares

Reduction of

irrigated cotton land

790 hectares 46 hectares

Benefit from

reduction in flooding

risk in perpetuity

$11.27 million $0.87 million

Having factored in the change in these figures, Option 2 remains the option

that delivers the highest net benefit both overall and to the Queensland

community. Similarly, Option 1 maintains the position of delivering the

second highest net benefit both overall and to the Queensland community,

ahead of Option 3.

72

Limitation of our work

General use restriction

This report is prepared solely for the internal use of Ensham Resources Pty

Ltd. This report is not intended to and should not be used or relied upon by

anyone else and we accept no duty of care to any other person or entity.

The report has been prepared for the purpose of that set out in our

contract. You should not refer to or use our name or the advice for any

other purpose

73

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