Friday, June 25, 2010

We Can't Eat Coal: Some of the Potential Benefits of Mining Tax in Australia

What will 11-month old Alexander see, eat and breath in 30 years time?

It was my first drive through the beautiful Hunter Valley when I saw the mines, the power plants and the dust haze in the sky. Only a few weeks ago, I drove from Canberra to visit my old friend Jules and her son, Alexander. They live in the Upper Hunter, and mining is part of their daily routine. I noticed the slag heaps, mounds, holes and piles of coal. Questioning people, I discovered some interesting facts and concerns about the industry in the area. People were concerned about mining in rich agricultural regions, like the Liverpool Plains. They were worried about water and air quality. The people of Broke were concerned about the Gas Plants proposed for the middle of their town. As I drove back to Canberra, past the vineyards facing the mines, it got me thinking about the long-term implications of mining and the potential benefits of the Mining Tax.

Can we fix that hole in the ground?

Mining results in changes to the environment, such as holes and mounds, and it is difficult to fix these changes. Current legislation requires strict environmental management and reporting of mining operations. This includes mine rehabilitation bonds; money which is kept until the site has been repaired after mining has finished. Only one mine in Australia has had its bond returned as a result of successful rehabilitation. This demonstrates that mines are responsible for repairing the land and looking after the environment. This is reflected in the work by various parties, such as Goldfields Environmental Management Group. However, mining causes irreversible environmental change, and there has only been limited research by industry and independents to understand some of these changes. Some of my own research is focused on improved understanding of rehabilitation after mining. In particular, determining methods to rehabilitate under extreme mine conditions and frameworks for rehabilitation (Drake et al. 2010). However, more research is needed to determine effective long-term rehabilitation of mine sites for multi-purposes, including agricultural production and conservation.

Does mining impact on agriculture and food security?

Mining is impacting on high agricultural production areas, and this has the potential to reduce food security. The Hunter Valley and Liverpool Plains are two of the most agriculturally productive regions in Australia. Both are also mineral resource rich. There is concern that mining in these high agricultural areas will reduce land available for food production, and thus decrease food security. In July 2009, ABC news looked into the issue of mining on the Liverpool Plains. They found that 'The area produces massive quantities of wheat, corn, sunflower seeds, canola, and sorghum along with sheep and cattle. The soil there is so good the locals say you can grow anything - even in drought'. Should we be mining in areas that are so fertile and support us during drought? How will this affect future food supplies? Not only is there concern about food production, but if the land after mining will ever produce food again. There has been some international research into restoring closed mines back to agricultural land. This includes looking at the impact of mine wastes (heavy metals and toxins) in the food chain and production agriculture. However, there is a lack of Australian specific case-studies regarding the use of post-mined land for agricultural production. Therefore, restoring agricultural systems post-mining, and the impact that mining may have on food security needs to be better understood.

It is a non-renewable resource! 

One day, the resources will run out and the profiteering will be over. Minerals are non-renewable resources. This means that once they are dug up and used, they are gone. You can only use coal once. This means that we only have the ability to profit from these resources once. There are many concerns about what will happen once the mines are gone. Towns, like Broken Hill, which were once booming with minerals and wealth become ghost towns. Once the minerals are gone there are no jobs, no money and no services. Mining non-renewable resources creates wealth in a short period of time, but also has long-term repercussions once gone. More research and investment needs to go into long-term economic and social issues concerning mine closure. Could the Mining Tax be used?

How can we use the Tax for the future? 

Mining can cause impacts on the environment, and has the potential to impact on our social, economic and agricultural systems. We need to know more about the impact mining may have on our future and how to deal with it. Should we consider using  part of the Mining Tax to improve understanding of these issues and invest in our future?

One way of dealing with the future impact of mining is an investment fund using a proportion of the Mining Tax. The Mining Tax could be used to tackle some of the problems that may occur from mining. It has already been stated that part of the Tax is to be used for super contributions, which will help to secure our future. It could also be used to invest in other future economic, environmental and social securities. This could include schools, health care, alternative income sources at mine closure etc. The tax could also fund research directly related to mining, including: improved understanding of environment and rehabilitation, food and water security, social and economic futures, alternative/renewable energy and technologies. Investing in researchwill help us understand how to deal with some of the issues of mining and secure our future.

Future Funds?

Future Funds have been created by many countries to invest in the future of their nation. Future Funds come under the banner of Sovereign Wealth Funds, which are used to invest in the future of the country. Each country will have a different source of funding and different objectives for the fund. For example, Norway have the Government Pension Fund which is funded from oil profits. Australia already has a future fund, and is appropriately titled the Future Fund. The money sourced for the Future Fund is non-commodity (not from mining) and is used to benefit superannuation, infrastructure, healthcare and education, among other objectives. Could we consider investing some of the Mining Tax into the Future Fund? Perhaps they could broaden the goals of the fund to include investment in mining related research and future securities? 

How the Mining Tax will be spent or used as part of a Future Fund will determine the benefits of the Tax for the Australian people and environment. How do you think we can spend the Mining Tax to secure the future of Mining in Australia? A fund for our future? What do you want to wake up to in 30 years time? What do you want Alexander to wake up to in 30 years time?

Love to hear your ideas and opinions. Please leave them below.

For more on mining in our food-bowl, see: Landcare Liverpool Plains. I am also happy to send a copy of any of my papers upon request.


  1. @soilduck tweeted a link to this post when I publicly question why the Greens would support either #rspt or #mrrt, as Adam Bandt said he would yesterday at the National Press Club.

    What follows is an extended version of my tweets back to @soilduck.

    Much better to stick with increased production based royalties rather than profit based taxes. If the Greens are supporting it for some Future Fund, they think they will get some of that money for their favoured projects. The Greens are in it for the money too! "We'll sacrifice some land to mining so we can do 'good' elsewhere"!

    Both #rspt & #mrrt backend taxation. Allowing tax credits for state royalties & other measures, makes starting a mine easier.
    Making marginal projects more viable!

    If #rspt/#mrrt work as Henry/economists say, it will mean more mining. Miners make more total dollars (but a lower return of capital) even after a bigger govt tax take. Bigger pie, more pie all round, at the expense of the environment.

    Remember the Minerals Council wanted profit based resource rents over prod royalties, they only throw a wobbly then government surprised them with the 40% super profit tax rate and low threshold cut-in at 6% return on capital.

    Do you actual think the bulk of the money will go into a 'future fund'. I think both Labor & Liberals will piss it against wall with business as usual.

    I think we'll get the extra mining (more/bigger holes in the ground) with little long term benefits. So for me the status quo is preferable to either the #rspt or the #mrrt.

    My preference is to simply increase royalties, with a state federal split. This is reform that requires cooperative reform with the states via COAG. It doesn't encourage mining like the #rspt and #mrrt do. Since it required COAG work, it was to hard for the last government and meant less money for them.

    Our own version of the Oil curse.

  2. Mining is a huge industry in that country. It helps their economy and people benefits a lot from the mining tax. They should just maintain the industry, butthey shouldn't abuse it.

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